June 3 – The World Meteorological Organization is warning that this summer’s El Nino event could be the worst yet. Compounded by fertiliser shortages, inflation and rising oil prices, these shocks threaten to push an already fragile food industry to the brink, and the impact will land squarely in consumers’ shopping baskets.
While El Nino is part of our routine weather cycle, characterized by weakened trade winds and warmer Pacific currents, a “super” El Nino could achieve record-breaking severity, impacting the profitability of producers, retailers and farmers.
Forecasters suggest the El Nino developing over the next few weeks could be particularly potent, attracting media headlines as “super”, “supercharged” and – my favourite – “Godzila El Nino”. Weather anomalies are projected to intensify from July this year, peak during the winter and weaken by the summer of 2027, though some systemic effects may persist and even last into a second growing season and beyond, affecting availability and pricing into 2027 and 2028.
Global food security relies heavily on a highly concentrated supply chain. Just four crops, wheat, rice, maize and soybeans, account for over 60% of global calories. While localised regional shortages are typically balanced by other markets, a global El Nino triggers teleconnections: simultaneous weather anomalies across different continents that cause correlated crop failures. And this systemic drop in supply leads to direct price increases at supermarket tills.
Changing weather conditions affect plant physiology and animal health in distinct ways. Higher temperatures and reduced rainfalls impact arable production by causing heat stress in developing plants, which stunts growth and affects initial germination, pollination, filling and ripening. Each crop differs in the temperatures it tolerates and timing of its growth cycle, so changed weather patterns affect each plant type in different ways.
Some changes can be beneficial: abundant rainfall and improved temperatures increase yields. But extreme conditions of prolonged drought can cause failure of root systems and even loss of the soil matrix itself, leading to dustbowls in previously productive regions.
Beef and dairy, poultry, pork, lamb and other meats are a major part of the global food system and have higher value by weight than grains or vegetables. Cattle have their own thermal comfort zones and suffer from heat stress, which reduces feed intake, so they fatten more slowly. Dairy cows are even more sensitive: a single day of heat stress can reduce milk production by 10% and reduce the quality of milk. Poultry production is troubled by increased cost of feed, loss of grazing and potential for heat stress, which can be fatal at extreme temperatures.
Because demand for basic staples is inelastic – consumers must eat regardless of cost – even small supply deficits cause disproportionate price surges. Scenarios for this El Nino indicate price shocks of 10% to 50% across core commodities, with highly exposed crops, including rice, palm oil, sugarcane and coffee, potentially experiencing surges of 50% to 100%, or more.
In the past, price shocks struck one commodity at a time. A simultaneous, cross-category surge means consumers will be hit harder and broader than ever before.
Worryingly, price rises can be heavily amplified by market panic, speculative trading and government interventions. If El Nino triggers major shortfalls in rice production, the governments of India, Vietnam and Thailand could enact export bans to feed their own populations, removing millions of tonnes from the global market and causing prices to escalate. A significant failure of Australia’s wheat crop could similarly trigger inflationary panic buying in international markets.
The business challenge has shifted from simply enduring the next disruption to preparing business models for a world in which volatility becomes a permanent operating condition.
To navigate this volatility, forward-looking food corporations are shifting from reactive crisis- management to proactive climate resilience.
In doing so they are securing a “resilience dividend” – a strategic advantage protecting corporate earnings during severe shocks. Building supply chain resilience involves a calculated balance between two complementary approaches: diversifying to de-risk and investing in resilient agriculture.
An effective resilience strategy does not treat these as an either/or choice. Instead, it integrates actions from both approaches into a cohesive framework.
Here are a couple of examples:
- In Ivory Coast, rising temperatures and erratic rainfall severely threaten coffee production. To combat this, Nestle recently completed a multi-year research project evaluating robusta coffee varieties. They found that planting a validated mix of six specific varieties boosted yields by up to 86% while significantly enhancing drought tolerance. Through the Nescafe Plan, these resilient varieties are now being distributed to local farming cooperatives, securing Nestlé’s future supply chain.
- Meanwhile, Unilever is integrating regenerative agriculture across deeply exposed supply chains, including soy, palm oil, rice and tea. Initial pilots across 11 countries have already delivered positive impacts on yield stability, water management and emissions reduction.
In today’s climate reality, a single large-scale climate event can trigger correlated failures across different continents and commodities, creating systemic risks that traditional supply chain diversification can no longer mitigate. But by prioritizing predictability and long-term supply relationships, food enterprises can transform climate volatility from a catastrophic operational threat into a sustainable competitive advantage.
Source：Reuters
