El Niño Puts Cocoa, Coffee and Sugar Supply Chains Back in Focus

A strengthening El Niño is pushing El Niño commodities back to the centre of the inflation story, as a small group of tropical producers faces another year of abnormal heat, drought and excess rain that could again tighten cocoa and coffee supply chains. The U.S. National Oceanic and Atmospheric Administration (NOAA) has confirmed El Niño conditions and various analysts estimate around a two‑thirds probability that a very strong or “super” El Niño could develop in 2026, raising weather risks for key soft commodity regions from West Africa to South‑East Asia.

Cocoa: concentrated supply, asymmetric weather risk

Cocoa remains the clearest example of how El Niño commodities can transmit regional weather shocks into global food prices. Analysts note that past strong El Niño events have often been associated with reduced cocoa output, underlining the structural vulnerability of the crop to disrupted rainfall and heat stress.

During the 2023–24 El Niño, West Africa — with Ivory Coast and Ghana together producing well over half of the world’s cocoa — first faced rainfall at roughly twice normal levels, which drove a wave of fungal disease in already stressed trees. The pattern then flipped in 2024, with intense heat and strong, dry Harmattan winds causing disease-weakened trees to shed flowers and sharply curbing the subsequent harvest. Ecuador, the third-largest cocoa producer, often experiences altered rainfall patterns in El Niño years, including episodes of heavier rain and flooding in some regions, adding local flood and disease risk even as West Africa struggles with heat and dryness.

The market response has been stark. Cocoa futures roughly doubled during 2024 as West African output fell, with prices briefly pushing above US$10,000 a metric tonne and trading above some industrial metals. That price shock fed directly into global confectionery margins and consumer prices for chocolate. For investors, the episode confirmed that climate-linked production volatility is now central to cocoa’s risk premium, not a tail event. With another potentially very strong El Niño building, production recovery in Ivory Coast and Ghana, disease management and political support for smallholder investment will be critical variables for the 2027–28 supply balance.

Coffee and sugar: Vietnam, Indonesia and Brazil in focus

Robusta coffee presents a parallel vulnerability. El Niño typically brings higher temperatures and reduced rainfall to top robusta producer Vietnam and to Indonesia, the third-largest grower, from mid-year onwards — a period critical for crop development. Together, Vietnam and Indonesia supply roughly half of global robusta output, depending on the season, so any sustained dryness can meaningfully tighten the segment’s balance. Citi Research has warned that El Niño‑linked dryness in key Asian producers could significantly trim robusta yields, with the impact likely felt from the fourth quarter as harvests come in. In a market where robusta is already in high demand as a cheaper input for blends, that sets up a renewed upside risk to prices and to downstream instant coffee and mass-market brands.

Arabica’s exposure is more nuanced. A very large share of global arabica production, around 40%, comes from Brazil, where El Niño can initially help the crop by reducing the risk of damaging winter frosts. However, the same pattern often brings hotter, drier conditions in the fourth quarter to Brazil’s coffee belt, just as the next crop is forming, which can curb output in the following year. Traders are watching for that shift, as any hit to Brazil’s 2027 crop would tighten both arabica and robusta availability at the same time.

Sugar, another core component of the El Niño commodities story, has a more mixed profile. For Brazil, the top sugar producer and the largest single exporter with around one‑third of global exports, El Niño can bring shifts in rainfall patterns, including episodes of heavier rains that may disrupt harvesting and reduce cane quality in the short term. Yet, over a longer horizon, above-average rainfall tends to support cane growth and can strengthen the following year’s crop, moderating bullish scenarios. In India, one of the largest sugar producers, and Thailand, a key exporter, El Niño has often been associated with weaker monsoon rains, which can reduce cane yields and exportable surpluses.

For investors, the message is that weather-linked supply risk is once again front-loaded into tropical softs, with cocoa and robusta coffee most exposed and sugar offering a more balanced profile. Positioning in El Niño commodities over the next 12–18 months will hinge on real-time climate data, West African disease and yield trends, Vietnamese and Indonesian rainfall patterns, and Brazil’s ability to convert wetter conditions into a stronger 2027 sugar and coffee crop.

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