The U.S. National Weather Service is forecasting a greater than 90% chance of a very strong El Niño event in the Northern Hemisphere this year. Additionally, there is a 69% chance that it will be the strongest event since official records began 1950. It may even exceed records by such an extent that some experts have started referring to it as a “Super El Niño.”

Strong seasons have caused significant damage in recent memory. In the 1980s and 1990s, destructive El Niños left behind as much as $4 to $5 trillion dollars in damage per event. Projecting into the future, a Darthmouth College study estimates $84 trillion in economic damage from El Niño cycles over the 21st century. Given the risk, what impact will a strong 2026-27 season have on business supply chains and what does that mean for the broader economy? How can businesses prepare for this event and those to follow?

Morgan Stanley predicts an impact across multiple regions, commodities and asset classes from “sugar and cocoa to copper and credit.” Underpinning everything is the impact on energy markets, which will be further strained. Oil and gas market disruption is still ongoing from the U.S.-Iran War. The closure of the Strait of Hormuz instantly cut off a fifth of global supply, according to the International Monetary Fund. Prices have stabilized due to increased production outside the Gulf region, a drawdown of inventories, and a decline in demand, but are still up about 30% from a year ago. Additionally, there is now less slack in the system and fewer reserves to soften further shocks. Any weather-related disruptions resulting from El Niño could lead to further price hikes. The effect will ripple across all global commerce.

War-related inflation has hit fertilizer prices as well. This will have an impact across a variety of food commodities. Drought conditions across Asia and Australia could further impact rice, maize and wheat yields. The price of many staple products from beef to milk to onions are already under immense pressure. Tomato, potato and carrot prices are projected to double as El Niño impacts agricultural conditions in Brazil. As reported by Reuters, extreme heat across Europe is already disrupting Parmigiano........

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