Understand how El Niño impacts crops in tropical regions

El Niño represents the warming of sea surface temperatures in the Eastern Pacific caused by weakening trade winds. It occurs naturally every two to seven years, and usually lasts nine to 12 months.

The climate pattern changes with the record of higher temperatures across the planet.

Droughts are also recorded in regions including South and Southeast Asia, Australia and Southern Africa.

And more intense rains in other areas, such as southern South America and the United States.

NOAA (US National Oceanic and Atmospheric Administration officially confirmed the formation of El Niño last week. Furthermore, it reported that the climate pattern is expected to intensify, with a 63% probability of a very strong El Niño or "super El Niño" towards 2027.

Drought, heat or excess rain caused by El Niño are a serious blow to farmers who are already facing shocks in the prices of fertilizers and diesel this year, stimulated by the War in the Middle East.

Soft commodities have seen strong price increases during past El Niño episodes

COCOA
All strong El Niño events over the past 55 years have reduced cocoa production, according to investment firm WisdomTree.

During the last El Niño, which occurred between 2023 and 2024 and was considered moderate to strong, the world's top producer, West Africa, was initially hit by twice its normal rainfall, which left cocoa trees exposed to a fungal disease.

In 2024, the climate pattern reversed and West Africa was hit by intense heat and Harmattan winds, which were unusually dry and strong, causing trees weakened by the disease to lose their flowers.

"Everybody thinks El Niño is just associated with droughts in West Africa. That's not necessarily true. Because of climate change... the result is sometimes too much rain at the beginning. And right now, that's my biggest concern," said Jim Roemer of consultancy Best Weather.

About half of the world's cocoa is grown in Côte d'Ivoire and Ghana, the world's first and second largest bean producers, respectively. Ecuador is the third largest in the world and normally experiences excessive rainfall during El Niño episodes.

Cocoa prices almost tripled in 2024 after crop failure in West Africa. They have risen to record levels, above $12,000 per metric ton by the end of 2024, making the chocolate ingredient more expensive than many industrial metals.

COFFEE
El Niño is especially problematic for Robusta coffee (conilon) because it typically brings higher temperatures and reduced rainfall to the largest producer, Vietnam, and the third largest, Indonesia.

The adverse climate affects both countries, which together account for around 50% of global Robusta production, during the crop's development phase.

The impacts are felt from the fourth quarter onwards, during the harvest. "The drought in Vietnam and Indonesia could significantly reduce Robusta coffee productivity," Citi analysts pointed out.

For Arabica coffee, almost half of which is grown in Brazil, the impact of El Niño is more subtle.

Carlos Santana, commercial director of EISA (a subsidiary of trader ECOM), said that El Niño could initially be positive for the crop Brazil is currently harvesting, as higher temperatures could prevent damaging winter frosts.

In the long term, however, El Niño typically brings drought and heat to Brazil's coffee regions in the fourth quarter, when the next crop is developing, putting it on track to hurt production in 2027.

SUGAR
For sugar, one of the most traded soft commodities in the world, El Niño typically brings excess rain in the second half of the year, which can interrupt and reduce the quality of the harvest in the largest producer, Brazil. In India (second largest sugar producer) and Thailand (second largest exporter), on the other hand, the weather pattern typically reduces rainfall during the summer monsoon.

India expects the 2026 monsoon to bring the lowest rainfall in 11 years. And with rainfall, estimated at 90% of the average, during the harvest development period from June to September.

Hedgepoint's head of sugar, Carlos de Mello, estimates that even a moderate El Niño could reduce India's production by around 1 million metric tons.

In the long term, the above-average rainfall that El Niño typically brings to Brazil's sugarcane regions could help next year's harvest.

Hedgepoint's De Mello said that overall it is "difficult to have a bull market scenario for sugar with El Niño" because of its potential benefits for Brazil's 2027 harvest. The country accounts for around half of world sugar exports.

(Reporting by May Angel in London and Marcelo Teixeira in New York; Editing by Emily Schmall and Nia Williams)

Source: CNN