The Next El Niño: Forecast for 2026–2027 and Its Potential Impact on Commodities

The Next El Niño: Forecast for 2026–2027 and Its Potential Impact on Commodities

As of mid-May 2026, the equatorial Pacific is in an ENSO-neutral state but shifting rapidly toward warmer conditions. NOAA’s Climate Prediction Center (CPC) has issued an El Niño Watch, with an 82% chance of El Niño emerging in the May–July 2026 period and a 96% probability it will persist through the Northern Hemisphere winter of 2026–2027 (December 2026–February 2027).

International models from the IRI, WMO, and ECMWF largely align with this outlook. Many forecasts suggest this could develop into a strong—or even “Super”—El Niño, with sea surface temperature anomalies potentially reaching or exceeding +2°C. While peak strength remains uncertain due to the spring predictability barrier, the trajectory points to significant global weather disruptions.

Understanding El Niño

El Niño is the warm phase of the El Niño-Southern Oscillation (ENSO), characterized by warmer-than-average sea surface temperatures in the central and eastern equatorial Pacific. It weakens trade winds, alters atmospheric circulation (the Walker Circulation), and triggers widespread shifts in temperature and precipitation patterns.Typical effects include:

• Droughts and drier conditions in Australia, Indonesia, Southeast Asia, parts of India, southern Africa, and northern South America.
• Wetter conditions and flooding in the southern United States, Peru, Ecuador, and parts of East Africa.
• Variable impacts on monsoons, hurricanes, and global temperatures—often pushing record warmth.

These shifts disrupt agriculture, mining, energy production, and supply chains, creating ripple effects in commodity markets.

Current Forecast Details

As of the latest NOAA CPC update (mid-May 2026), subsurface ocean heat content is building, and surface temperatures are near or above average in key Niño regions. Models like the North American Multi-Model Ensemble (NMME) favor El Niño formation by June–August, strengthening into fall and winter.

Strength probabilities indicate growing odds of a moderate-to-strong event, with some ensembles hinting at anomalies rivaling or exceeding recent strong episodes. A “Super” El Niño (historically rare, with very high anomalies) is not guaranteed but is increasingly plausible. Impacts would be more pronounced if ocean-atmosphere coupling strengthens robustly through summer.

The event is expected to peak in late 2026 to early 2027, with gradual decay possible afterward. A return to La Niña in 2027–2028 remains speculative at this stage.

Historical Context and Commodity Impacts

El Niño events have driven notable commodity volatility. Studies show a typical El Niño raises global non-energy commodity prices by around 3–5%, with stronger events amplifying this to peaks of ~9% for food commodities, often with lags of 6–16 months.

Effects stem from weather extremes affecting supply more than demand, compounded by trade, stocks, and other factors. Modern adaptations (irrigation, resilient seeds, global markets) have reduced some risks compared to historical famines, but vulnerabilities persist, especially in concentrated production regions.

Agriculture and Food Commodities

This sector faces the most direct pressure:

• Drought-sensitive crops in Asia and Australia (rice, wheat, palm oil) often see reduced yields. India’s monsoon can weaken, pressuring rice and sugar. Southeast Asia faces risks to palm oil and cocoa.
• Cocoa stands out as highly vulnerable—every strong El Niño in recent decades has cut production in West Africa and other origins, with lagged effects.
• Sugar and coffee (especially robusta) face mixed but often upward risks from dryness in key producers.
• Soybeans and corn show regional variation: potential benefits in the Americas (better conditions in parts of Brazil/Argentina/U.S.) can offset losses elsewhere, but overall tightness is common in strong events.

Historical data links El Niño to higher food price inflation, with soybeans, corn, rice, and vegetable oils particularly responsive. Volatility rises as markets price in uncertainty. For the 2026–2027 cycle, supply impacts may build into 2027 harvests, supporting bullish tilts in many ag futures, especially if paired with other stressors like fertilizer constraints.

Energy Commodities

Impacts are mixed:

• Reduced hydroelectric output in drought-hit regions (e.g., parts of South America, Australia) can boost demand for coal, natural gas, or alternatives.
• Oil sees indirect effects—sometimes downward from global economic signals or weather, but geopolitics and OPEC+ decisions usually dominate.
• Overall, non-fuel commodities rise more consistently than energy.

Metals and Mining

Heavy rainfall and flooding disrupt operations in Australia, Indonesia, South America, and Africa:

• Copper, nickel, coal, and bauxite supplies can tighten from mine closures, port disruptions, or transport issues.
• This often provides price support, especially for battery and industrial metals amid energy transition demand.

Forestry products and other raw materials also respond to these patterns.

Broader Market and Economic Implications

Commodities are not isolated. An El Niño can:

• Elevate food inflation, affecting consumer prices and central bank policies.
• Increase price uncertainty, reflected in higher futures volatility and option premiums.
• Influence equities, currencies (e.g., AUD, ZAR, INR sensitivity), and broader risk sentiment.

Markets often front-run forecasts. Ag futures have shown early reactions in past cycles, with positioning shifts ahead of physical harvests. A strong 2026–2027 event could add a bullish bias to non-energy commodity indices into 2027, though dispersion across sectors will be high.

Key caveats:

• Not every El Niño produces textbook impacts—strength, timing, and interactions with other climate modes (e.g., Indian Ocean Dipole) matter.
• Global trade, stockpiles, and technology buffer shocks better today than in the past.
• Geopolitical or policy factors (e.g., trade tensions, subsidies) can overshadow climate signals.

Preparation and Outlook

For producers, traders, and investors: Monitor NOAA CPC monthly updates, IRI plumes, and crop-specific reports. Risk management tools—futures, options, insurance—become valuable as volatility rises. This developing El Niño adds another layer of uncertainty (and opportunity) to commodity markets in 2026–2027. While it poses risks to food security in vulnerable regions, it also highlights the importance of resilience, diversification, and adaptive strategies.

In summary, expect El Niño to emerge soon and influence the weather through at least winter 2026–27. Commodity moves are likely, with upward pressure probable in agriculture and select metals, tempered by regional winners and modern safeguards. Stay informed as forecasts refine—climate patterns like this remind us how interconnected our weather, food systems, and economies truly are.

By Anna Coulling – creator of volume price analysis

By Anna Coulling – creator of volume price analysis