LIFE IS A VOYAGE ARE YOU PREPARED?

Who and what will be impacted? Based on the chart of the world we break it down to drought risk, flood risk and everywhere else.

• Drought risk (amber): Australia, Indonesia and the Philippines, India, southern Africa (South Africa, Zimbabwe, Mozambique, Zambia, Namibia, Botswana), and Central America/northern South America (Mexico through Colombia and Venezuela) these regions typically see below normal rainfall during El Niño.
• Wetter/flood risk (blue): coastal Peru and Ecuador (sometimes dramatically so this is the pattern’s namesake region), southern Brazil, Argentina, and Uruguay, the Horn of Africa (Kenya, Somalia, Ethiopia), and the southern tier of the US from California through the Gulf Coast and Southeast, which tends to get a wetter, stormier winter.
• Everywhere else (gray) sees a weaker or less consistent typical signal.

Given this event is trending toward “very strong” or even “super” El Niño territory by winter, NOAA forecasters expect these typical impacts to be more pronounced than an average event.

Here’s what’s at stake, region by region, among the countries currently flagged for El Niño drought risk:

Southeast Asia – Indonesia, Malaysia, Philippines, Papua New Guinea, Timor-Leste
Indonesia and Malaysia together produce roughly 85% of the world’s palm oil, found in everything from cooking oil to packaged food to cosmetics. Indonesian palm oil exports have historically declined 6-12 months after major El Niño events, as drought-stressed trees produce fewer fresh fruit bunches. Indonesia is also a major robusta coffee and natural rubber producer, and the region grows significant rice tonnage that affects global food security stockpiles.

South Asia – India
India is one of the world’s largest rice exporters, and a weak monsoon tied to El Niño has historically pushed India toward export restrictions, which tightened global rice supply sharply in 2023. India also produces major volumes of sugar and cotton, both sensitive to monsoon rainfall.

Australia
A top global exporter of wheat, coal, iron ore, beef, and wool. Drought here mainly threatens the wheat and wool harvests. Mining output is less rainfall sensitive, but export logistics can still be disrupted.

Southern Africa – South Africa, Zambia, and Botswana
South Africa is the continent’s largest maize exporter and a major global supplier of platinum metals; Zambia is one of the world’s top copper producers; Botswana is a leading diamond producer. Drought stress here hits regional food security (maize is the staple crop across this whole bloc) as well as industrial metal supply chains.

Central America – Mexico, Guatemala, Honduras, Nicaragua, Panama
Guatemala, Honduras, and Nicaragua are significant arabica coffee origins; the region also exports bananas and sugar. Panama is a special case worth flagging on its own: a “Super” El Niño has historically driven billions of dollars in losses, and the 2023 event caused Panama Canal authorities to cut ship transits due to low reservoir levels – a major global shipping bottleneck that a strong 2026 event could repeat.

Northern South America – Colombia, Venezuela, Guyana, Suriname
Colombia is the world’s third-largest coffee producer (arabica). Venezuela, Guyana, and Suriname are oil producers, where drought has less direct effect on output but can strain hydropower and river transport logistics.

Two broader points worth flagging: analysts note a 6 -12-month lag before production impacts typically materialize from El Niño’s onset, and even a severe supply hit lands on grocery shelves with a further 6 -12-month lag, since much retail is contracted in advance. So, a drought hitting Southeast Asian palm oil or Central American coffee now would likely show up as price pressure in 2027, not immediately.

Bringing it All Together

What makes 2026 notable is that El Niño is arriving on top of an existing inflation shock rather than into calm markets. What are the implications for markets? It would appear inflation is here to stay, and with that interest rates will remain high and possibly go higher. Goldman Sachs projects a 15.8% surge in global food commodity prices from this combination, with the full impact not landing until late 2028. The IMF has a term for this: “climate-driven food-price inflation” persistent price pressure from El Niño layering onto global warming and conflict, more durable than a standard commodity cycle.

Looking at food supply from drought (rice, palm oil, coffee, wheat, metals and sugar) along with potential disruptions for logistics in the Panama Canal could drive prices higher. Usually the commodity price moves first, then store prices follow. If peak (El Niño) is in the fall of 2026, consumers will feel the increases on retail shelves across 2027.

The lag between the weather event and the price shock complicates the Central Bank’s job of telling a slow building supply shock apart from entrenched inflation, meaning some of the rate decisions happening now are a bet on a potential inflation wave that hasn’t fully arrived. The ECB has flagged El Niño as an inflation risk factor since 2023, warning it could “amplify the frequency of extreme weather events” layered on top of climate change. Even though the Fed hasn’t named El Niño explicitly, outside analysts are already treating it as a second engine on the same inflation train: Bloomberg Businessweek notes the 2023 El Niño hit “nearly every corner of the economy” – chocolate, soap, even flight fuel costs – and warns this event “threatens to be far worse.” The World Bank’s April 2026 outlook flags El Niño explicitly as one of several upside risks alongside energy, fertilizer costs, and biofuel demand that could push food prices well above its 2.5% baseline projection.

The 30-year Treasury yield has been climbing for weeks on concerns over government debt, heavy corporate issuance, poor market liquidity, and possible “bond vigilante” pressure. The administration is starting to show concern for the higher rates; last week, Treasury Secretary Scott Bessent announced a doubling of buybacks using cash from short-term bill sales to repurchase longer-dated bonds to backstop the 30-year yield. It briefly dropped 10 basis points to 5.19%, but climbed back. JPMorgan’s James Sullivan warned that propping up prices doesn’t fix underlying fundamentals: “It’s a little bit like paying your mortgage with your credit card.