A very strong El Niño: what it means for rice, sugar and palm oil supply into 2027

El Niño is a warming of the surface of the central and eastern Pacific Ocean that shifts rainfall around the world. It does not affect every region in the same way, and the strength of an event does not map neatly onto the size of its effects. But several of the crops we trade grow in places where El Niño has historically meant less rain, and this year's event is forecast to be unusually strong. This note sets out what the forecasters say and what it means for rice, sugar and palm oil. Figures are as reported up to 26 September 2026.

What the forecasters say

The US National Oceanic and Atmospheric Administration (NOAA) said on 10 September that El Niño is strengthening, with a greater than 90% chance of a very strong event during the northern autumn and winter of 2026/27. It gives a 75% chance that, in October to December, the event exceeds the strength of every El Niño since 1950.

The World Meteorological Organization's update of 3 September was just as clear. It gives a nearly 100% likelihood that El Niño lasts through February 2027 and expects it to reach very strong intensity before peaking towards the end of the year. The WMO also cautions that the strength of an event "does not translate directly into the magnitude of impacts in any region". Local weather still decides each crop.

Rice: a weaker Indian monsoon

India grows more than a quarter of the world's rice and is its largest exporter, and most of its crop is the kharif (summer) crop that depends on the monsoon. This year's monsoon has been weak. India's Department of Economic Affairs reported an all-India rainfall deficit of 13% as of 19 August, and the India Meteorological Department expected September rainfall to be below normal. By 21 August paddy had been planted on 34.48 million hectares, against 36.07 million hectares a year earlier.

The International Grains Council's September report expects world rice production in 2026/27 to fall for the first time in more than a decade, mainly because India's kharif crop is significantly smaller. It still expects world rice trade to reach a new high of 61.7 million tonnes in 2027, because India holds very large government stocks that can support exports. We cover this in more detail in our note on rice in 2026/27.

Thailand, Vietnam and Pakistan, the other main exporters, can also see drier conditions in El Niño years, which is worth watching for their next crops.

Sugar: India and Thailand in focus

The International Sugar Organization expects the world sugar market to move from surplus in 2025/26 to a small deficit of about 262,000 tonnes in 2026/27, with production down 1.15% to about 180 million tonnes. It named El Niño's possible effect on harvests in India and Thailand as a key factor. Both countries are major exporters of white and raw sugar to Asia, the Middle East and Africa.

Prices have already reacted. The FAO Sugar Price Index rose 11.9% in August, the largest monthly increase of any food group, on concern about the 2026/27 supply outlook. Our note on the sugar market looks at India's import move and Brazil's crop.

Palm oil: the effect comes later

Palm trees respond to drought slowly. Dry months reduce the number of fruit bunches that form, and the lower output shows up in harvests many months later. That is why analysts reported by The Star in September described El Niño as a significant supply risk for 2027, particularly in Indonesia, rather than for the rest of 2026. FAO already cited concern about El Niño's impact in Southeast Asia as one reason palm oil prices rose in August.

For buyers, this means the price effect of this El Niño on palm oil may arrive after the weather headlines have faded. Our note on edible oil prices covers the other factors, including Indonesia's B50 biodiesel rule.

Other crops to keep in mind

El Niño years have historically been linked with drier conditions in parts of southern Africa and Australia, and with wetter conditions in parts of South America and East Africa. For the commodities on our list, that matters for Australian wheat, for maize and oilseeds in southern Africa, and for harvest conditions in Brazil and Argentina. None of these outcomes is certain, which is why forecasters issue probabilities rather than predictions.

How buyers can plan for it

A strong El Niño raises the chance of a supply problem somewhere; it does not tell you where or when. These are the steps we suggest:

• Plan cover further ahead. For rice, sugar and palm oil, consider fixing part of your needs for the first half of 2027 earlier than usual, rather than relying on spot purchases.
• Keep more than one origin open. Qualify an alternative origin now (for example Thai or Vietnamese rice alongside Indian, or Brazilian sugar alongside Indian and Thai) so you can switch without a new approval process.
• Agree realistic specifications. A difficult crop year can mean more broken grains in rice or different polarisation and colour in sugar. Agree tolerances and the inspection method in the contract.
• Watch export policy. Governments sometimes restrict exports when a crop is short. India's record rice stocks make that less likely this season, but it is worth watching.
• Check documents early. Changing origin means new phytosanitary and origin certificates, and sometimes new import permits at destination.

We will update this note as the forecasts and the harvests develop. See our pages for rice, sugar and palm oil, or tell us what you need to cover.