How to anticipate an El Niño

The Australian wheat crop is failing, drought in West Africa is driving up cocoa prices, Chilean copper mines are being flooded and the Panama Canal has cut the number of daily transits. 

This dystopian picture is the emerging reality of what the United Nations is warning will be a "supersized" El Niño, the somewhat curious climactic anomaly that disrupts global weather patterns every few years.

El Niño isn't a single, high-impact event, but rather several medium-impact events. While those events might be reasonably predictable, how they combine to impact supply chains is unique every time. Advances in weather forecasting mean procurement and supply chain teams have more opportunity than ever to prepare not only themselves, but their whole organisations. The trick is to know what to keep track of, says CIPS global futurist Dr Graham Norris.

Getting wind of the future

Under normal circumstances, the wind over the Pacific blows from east to west, from the coast of South America toward southern Asia. This wind blows the warm surface water of the Pacific westward, bathing places like northern Australia and Indonesia in warmth but also a lot of rain. The warm water skimmed off the Pacific is replaced by cooler water that holds much less moisture, leaving places like Peru with an arid climate.

Every few years, for reasons no one understands, this all stops.

Instead of being blown west, the warm stays where it is. This is El Niño. The most obvious impact is that southern Asia and Australia end up much cooler and drier than usual, and Chile and Peru warmer and wetter. But complex climatic implications extend way beyond the Pacific Rim. India gets a weaker monsoon, and northern Brazil and southern Africa get less rain. On the other hand, east Africa and the southern United States tend to get more rain.

The whole phenomenon tends to start building in the spring, peaks in December and peters out in the first half of the following year. Yet the impacts tend to be felt for much longer. 

“Asia and Australia end up much cooler and drier than usual, and Chile and Peru warmer and wetter”

Commodities and services under pressure

El Niño inevitably results in flooding and wildfires in places not used to these. But it is the secondary impacts of unusual climactic conditions that give supply chain specialists headaches. The range of economic sectors implicated is broad.

• Agricultural commodities: Cocoa (West Africa), coffee (Brazil, Vietnam, Indonesia), sugar (India, Thailand), rice (Southeast Asia), palm oil (Indonesia, Malaysia), wheat (Australia), and fishmeal for animal feed (Peru) are all impacted. Poor harvests mean higher prices and sometimes export bans, as India did with rice in 2023.
  
  
• Energy: Hydropower depends on rain. Drought in Brazil, Colombia, Vietnam or southern Africa can cut electricity to factories and push countries to buy more gas and coal. Chinese aluminium smelters ran short of power in recent El Niños.
  
  
• Shipping: An important part of the Panama Canal is the artificial Gatun Lake, which is fed by rainfall. Low water levels in this lake cut the canal's capacity in terms of number of ships and how they are loaded. Low rivers also hit inland barge traffic on the Mississippi, the Rhine and the Amazon.
  
  
• Mining and metals: Heavy rains can affect copper mining operations in remote parts of Peru and Chile, while drought in Indonesia and Australia can cut nickel and coal production.
  
  
• Manufacturing: El Niño results in fewer Atlantic hurricanes but more Pacific typhoons, forcing suspension of production in places like Taiwan, Thailand, the Philippines and southern China. This can disrupt sectors such as chips, electronics and car parts.
  
  
• Textiles: Production of cotton from India and Australia, and wool from Australia, can be disrupted by unusual weather patterns.
  
  
• Health and labour: Heat waves reduce productivity outdoors, and disease outbreaks such as malaria affect workforces and demand for medical supplies.
  
  
• Insurance and finance: Insurance premiums can rise before and after El Niño events, and the currencies of agricultural product exporting countries can weaken.

Cascading crises

If we look at the history of El Niño, we can see how these medium-sized problems can have large, varied and wide-ranging implications.

The most recent El Niño was in 2023, and the weak monsoon prompted India, the world's biggest rice exporter, to ban shipments. The result was a 25 percent jump in the global price of rice and a 15 percent surge in the price of wheat, and important substitute. With wheat supplies already tight because of El Niño, the India rice ban compounded the problem, resulting in increasingly wild price swings in commodity markets.

Temperature and precipitation patterns that are typical of La Niña during (top) Northern Hemisphere winters and (bottom) summers. Map by NOAA Climate.gov, based on originals from the Climate Prediction Center

 
Another example is aluminium. The packaging industry uses around 16 percent of global aluminium supplies worth around $65 billion a year for everything from beverage cans to aerosols and foils. In 2023, low rainfall in southwest China reduced the capacity of the area's hydroelectric dams. Yunnan province, a major contributor to China's position as the world's biggest aluminium producer, relies on hydropower for around 80 percent of its electricity, and had to cut production at its electricity-hungry aluminium smelters by 40 percent. The result was a short-term surge of more than 10 percent in aluminium prices.

History doesn't repeat itself, but it rhymes.The lessons from previous El Niño events demonstrate there are opportunities for those who are nimble and brave enough to not just secure their organisation's supply chains, but provide strategic counsel on the opportunities.

Find out how to stay ahead of the game with these tips from CIPS futurist Graham Norris. 

Looking further back, we can see the long-term impacts of a short-term shock. In the 1972-3 El Niño event, warm water off Peru wiped out the anchovy fishery, which at the time supplied most of the world's fishmeal for animal feed. Fishmeal prices spiked, farmers switched to soybeans, soybean prices roughly tripled, and the US briefly banned soybean exports. That ban prompted Japan, which was heavily dependent on American soy, into investing in Brazilian farmland, which is a big part of why Brazil is now the world's largest soybean exporter.

Not again!

With so much experience of El Niño events, you might think we'd know how to prepare for the next one. Yet every El Niño is unique in its own ways, and shows up in a unique situation.

This El Niño, for example, is shaping up to be a humdinger. The US National Oceanic and Atmospheric Administration is giving a 69 percent probability this El Niño will exceed the strength of every El Niño on record since 1950. It has developed quickly, and may well last longer than usual, although none of this necessarily means its impacts will be greater.

ENSO Forecast Data © 2002-2026 by International Research Institute for Climate and Society is licensed under Creative Commons Attribution 4.0 International 

However, global temperatures typically rise after an El Niño, which means 2027 might well be the hottest year on record ahead of, in order, 2024, 2023, 2025 and probably, 2026.

“2027 might well be the hottest year on record.”

Each El Niño also arrives in unique geopolitical, economic and market conditions. Most critical of these at the moment is the conflict in the Persian Gulf, from where one-third of the world's fertiliser is shipped. As a result, Russia temporarily suspended exports of ammonium nitrate, and China, the world's largest phosphate producer, blocked phosphate exports. As well as improving production where the weather is fine, fertiliser can mitigate the impacts of drought in some crops, so it's absence will likely exacerbate the problems farmers face.

Food prices are already high and rising. The Food Price Index published by the Food and Agriculture Association shows prices rising strongly again, after falling from record highs in the wake of the Russian invasion of Ukraine.

Not only that, but supply chains are already pretty tight, with container rates up 40 percent in 2026. And export controls have now become de rigueur at the first sniff of a crisis, which could easily exaggerate any supply chain crisis.

On the plus side, the last few years of volatility have hardened supply chain professionals to uncertainty and primed them to be agile when their best-laid plans fall apart. A lucky few also have access to increasingly sophisticated data and systems that can help give them a heads up of danger and offer useful alternatives.  

History doesn't repeat itself, but it rhymes. The lessons from previous El Niño events demonstrate there are opportunities for those who are nimble and brave enough to not just secure their organisation's supply chains, but provide strategic counsel on the opportunities.