How procurement can withstand the blast of El Nino
Written by: Joe Adamski
Written by: Joe Adamski
When it comes to climate-driven supply chain disruption, the window for proactive procurement opens long before the impact is felt. Announcements about El Niño were being made in late 2025. The National Oceanic Atmospheric Administration (NOAA) said then that there was about a 60% chance that we’d be facing an El Niño by April or May of this year, and has confirmed we are definitely in an El Niño now. The worst will hit during Q4 of this year, into Q1 of 2027, and indications are that it’s going to be particularly strong.
Proactive procurement teams would have jumped on those announcements. The point of trying to be proactive in late 2026? It’s pretty much gone. At this stage, it's about looking at how you can still try to mitigate some of the issues. Nobody can avoid what is happening, and mitigation now is much better than doing nothing.
Looking for post-crisis solutions
Remember that El Niño occurs every few years, but that we’re starting from a higher climate baseline than we’ve ever seen. El Niño typically adds two tenths of a degree to the overall temperature of the global climate. The last reading that I saw suggested that we were about 1.2 degrees above pre-Industrial Revolution levels. If you add the two tenths to that, we're at 1.4, and 1.5 is considered one of the major tipping points.
Whether you’ve planned ahead or not, this is an opportunity to learn and start building resilience into your supply chain now. There are five aspects of El Niño that should focus procurement professionals' thinking:
- Time is of the essence
You have about a month to put plans in place for the harvest season that's coming up. The first thing that teams need to do is to run a sourcing stress test. This will look at where your sources of supply are for critical categories against El Niño impact zones. - Think about your suppliers
Identify which of them are in high-risk geographies and which commodities are single sourced from those regions. You should also understand which ones have the longest lead times. This creates a picture of the different risks that you might face. You can then conduct triage that is based on what your available mitigations are and make a decision for how to restructure your supply chain. - Take a hedging perspective
You want to execute forward contracts and hedges where you can before the markets tighten. That's where timing comes in, because at a certain point, the financial markets will tighten up, and that option will no longer be there. But you can lock in pricing right now for some commodities on a forward buy. Is it going to be higher than it was a year ago? Yes. Is it going to be less than it will be on the spot market? Most likely. - Look at your supply chain holistically
Diversify where you can. Sometimes you don't have a lot of options. Coffee and cocoa are good examples as there is a limited supply of both. There are only so many places where they grow, and alternative locations can only provide so much. People like to suggest Hawaii as an alternative for coffee, but it’s not going to replace growing regions around the world like East Africa or Central America. That said, understand what the impacts are and diversify where you can to get different sources of supply. - Climate matters
You need to start integrating climate forecasts into your planning cycles. If you were not paying attention to the NOAA's report about El Niño, you have created problems. By not including information from these reports in your scenario planning, you cannot see what you should have done differently in order to mitigate or even avoid impacts.
“Nobody can avoid what is happening, and mitigation now is much better than doing nothing."
- Joe Adamski
What makes this El Nino different
The problem we’re facing is that this El Niño is strong, that the climate picture is different and, finally, that it is sitting on top of a bunch of other macro disruptions that are happening concurrently. Having this El Niño occurring at the same time as the crisis in the Strait of Hormuz, for instance, means that its effects will be magnified.
Sticking with foodstuffs, one of the big issues that's come out of Strait of Hormuz has been the lack of fertiliser available in the world. A significant part of that was produced in the Gulf, and then shipped around the world. Well, that's not possible. And it just so happens that crops that are at risk from El Niño are ones that need the fertiliser.
The cost of all petroleum products has increased, but diesel is the biggest one for those for people in agriculture. That is impacting every aspect of the supply chain, because anything that has to be farmed and be moved by train or by truck is going to be affected. And it’s not just the tractors, but even a lot the machinery used for irrigation.
Wider disruption
All of that is going to drive increased costs. And to people who think that the worst thing that can happen is increased prices for candy bars, this is what we saw with the Arab Spring. One of the triggers for that was the lack of food availability. People couldn’t get bread, and that led to massive social disruption.
If people cannot get basic food because they are more expensive, we don’t know what other types of social disruptions we're going to see. And we don’t know what the government responses to that will be, either. India has already stopped sugar exports. Countries like Indonesia that are major rice producers might start trying to import rice from the rest of Southeast Asia.
Staple crops get impacted most because of their sensitivity to their climate, and that impacts the basic food that we all consume on a regular basis. In turn, that leads to knock-on effects on other commodities that end up creating significant disruptions to people's everyday lives.
AI to the rescue?
It might seem like AI is the answer to this, but here’s a note of caution. AI enables aspects of the solution that will help. These tools can find different vendors and give you near real-time reporting on where your stuff is as it moves through the supply chain. They can help you procure better, but they will not solve the problem.
They can't change the fact that the weather is impacting crop production. They can’t stop ports from being overwhelmed. And they can’t make the monsoon in India stronger so that there is no impact on production.
As the human, you still have to be there, doing the work, trying to come up with the solutions, being creative, and building the relationships that are necessary, both internally and with your suppliers. And as we can see from El Niño, it’s you who needs to do the strategic analysis and the scenario planning that gets you ready for the next time.