El Niño Is About to Test the Supply Chain Map You Built for EUDR

NOAA's Climate Prediction Center has an El Niño Advisory in effect and puts a 69% probability on this becoming a historic event, stronger than any since records began in 1950. The economic modelling attached to it runs into the trillions. But the number that should interest anyone importing soft commodities is not the headline loss, it is the list of countries doing the losing, because it reads like a roll call of palm, cocoa, coffee and rubber origins.1,2

Last updated 24 August 2026. Reflects the NOAA Climate Prediction Center ENSO diagnostic discussion of 13 August 2026 and the Peterson Institute analysis published 20 July 2026 and revised 18 August 2026.

Key takeaways. NOAA has an El Niño Advisory in effect, with the July Nino 3.4 anomaly at plus 1.4 degrees Celsius and a greater than 90% chance of a very strong event through the northern hemisphere autumn and winter. There is a 69% probability the October to December index exceeds plus 2.5 degrees, which would surpass every event since 1950. Peterson Institute modelling puts the first year cost at roughly 986 billion dollars, close to 0.8% of global output, and the six year cumulative cost at 17.56 trillion dollars within a wide confidence range. The most exposed economies are Ecuador, Peru, Indonesia, Malaysia, Suriname, Panama, Nicaragua, Togo, Zambia and Costa Rica, which between them supply a large share of the world's palm oil, cocoa, coffee and rubber. The lag is documented rather than theoretical: the El Niño that began in the second half of 2015 cut Malaysian crude palm oil output by 2.64 million tonnes, or 13.2%, in calendar 2016, which MPOB attributed directly to the drought. A peak in late 2026 therefore lands in 2027 supply. Companies that collected plot level geolocation for EUDR already hold the raw material for a physical risk screen, and investors have started asking for exactly that analysis.

What NOAA is actually forecasting

This is not a routine advisory. In its 13 August diagnostic discussion, the Climate Prediction Center recorded a July Nino 3.4 anomaly of plus 1.4 degrees Celsius and assigned a greater than 90% chance to a very strong event developing through autumn and winter 2026 to 2027. More striking is the tail: a 69% probability that the October to December three month index exceeds plus 2.5 degrees, which would make it the strongest event in the record since 1950.1

Strength matters because the damage is not linear. A moderate El Niño redistributes rainfall. A very strong one suppresses monsoon rainfall across maritime Southeast Asia, drives drought through Indonesia and Malaysia, and flips the Pacific coast of South America into flooding. Those are two different weather regimes hitting two different parts of the same supply base.

The economics, and the more useful number underneath

The headline figures are large and slow. Analysis by Cullen Hendrix at the Peterson Institute for International Economics, applying the framework developed by Callahan and Mankin, estimates a first year global cost of about 986 billion dollars, roughly 0.8% of global output, rising to a cumulative 17.56 trillion dollars over six years with a confidence interval spanning 7.2 to 28.5 trillion. The persistence is the point. El Niño losses do not resolve when the weather does.2

Figure 1. Malaysian crude palm oil production, MPOB annual figures. The El Niño that began in the second half of 2015 shows up in the 2016 output, not the 2015 output, which is the lag that catches buyers out.
20191817 CPO production (Mt) 2.64 Mt lost in 2016 13.2% of national output 201520162017 201820192020 202120222023 2024 Year Source: Malaysian Palm Oil Board, annual industry overviews. Vertical axis begins at 17 Mt.

The distributional detail is where the operational risk sits. The losses are not spread evenly. The same analysis finds 51 strongly teleconnected countries facing average output losses of about 3.6%, despite representing only 9.9 trillion dollars of combined output. The ten most exposed are Ecuador, Peru, Indonesia, Malaysia, Suriname, Panama, Nicaragua, Togo, Zambia and Costa Rica.2

Read that list again as a procurement manager rather than an economist.

Why that country list should worry a soft commodity buyer

These are origin countries, not abstractions. Indonesia and Malaysia alone account for close to 90% of global palm oil production. Ecuador is a major cocoa exporter. Peru, Costa Rica, Nicaragua and Panama are coffee origins. Togo and Zambia sit inside African agricultural supply chains. The economies most exposed to a historic El Niño are, to a striking degree, the economies that fill European and Asian shelves.3

Most exposed economies Principal soft commodity exposure Covered by EUDR?
Indonesia, Malaysia Palm oil, close to 90% of world production between them; also rubber, cocoa Yes
Ecuador Cocoa, bananas, coffee Yes
Peru, Costa Rica, Nicaragua, Panama Coffee, cocoa, tropical produce Yes
Togo, Zambia Cocoa, coffee, agricultural staples Yes
Suriname Timber, agricultural exports Yes

And the damage arrives late. Palm is the clearest case. Drought stress does not destroy the tree, it changes its behaviour, suppressing female flower production and lowering oil content in the fruit. The clearest evidence is Malaysia's own. The El Niño that began in the second half of 2015 does not appear in the 2015 production figures at all. It appears in 2016, when the Malaysian Palm Oil Board recorded crude palm oil output of 17.32 million tonnes against 19.96 million the year before, a fall of 2.64 million tonnes or 13.2%. MPOB attributed it explicitly to prolonged dry weather and below average rainfall from the El Niño, with fresh fruit bunch yield down 13.9%. Output rebounded to 19.92 million tonnes in 2017.3,8

Figure 2. The lag that catches procurement teams out. In the last major event the drought began in late 2015 and the production loss landed in calendar 2016, a year later.
Oct to Dec 2026 Through 2027 Into 2028 Forecast peak of the El Niño event Yield effects surface in the following crop year Recovery typically takes a further year The contracts being negotiated now are the ones exposed. Sources: NOAA Climate Prediction Center; palm oil yield response literature.
The practical consequence is a timing mismatch. The weather peaks in the quarter when most annual supply contracts are being priced, but the yield damage does not appear in the data until well after those contracts are signed. Buyers who wait for the harvest figures will be negotiating with information their counterparties already have.

The dataset you already built

Here is the part most companies have not connected. Anyone preparing for the EU Deforestation Regulation has spent this year collecting something unusual: the latitude and longitude of every plot of land producing their palm, cocoa, coffee, rubber, soy, cattle and timber, to at least six decimal places, with polygons for plots above four hectares.4

That is a compliance artefact. It is also, without a single additional data request, a physical risk exposure map.

EUDR plot geolocation+climate hazard layer=supplier level physical risk screen

One dataset, two regulatory jobs. The plot coordinates collected for deforestation due diligence are the same coordinates a physical risk assessment needs.

The overlay is straightforward. Take the plot coordinates already in your due diligence file, join them to a drought or rainfall anomaly layer, and you have a ranked list of which suppliers sit in the strongly teleconnected zone. That tells you where to seek alternative volume, where to hold inventory, and which counterparties to talk to before their harvest fails rather than after.

What investors have started asking for

The disclosure question is converging on the same analysis. The Institutional Investors Group on Climate Change set out adaptation and resilience engagement priorities for 2026, and the questions members are putting to companies are specific: the methodology used to assess physical risk, exposure through direct operations and through the supply chain, the affordability and availability of insurance, and the adaptation measures actually being implemented.5

The insurance question is the one that catches people out. It converts an abstract climate scenario into a line item that is already moving. A company that cannot say whether its key sites remain insurable at current premiums is telling investors something, whether it means to or not.

And physical risk is where climate reporting is weakest. This is well evidenced rather than anecdotal. Both the SGX RegCo and NUS Centre for Governance and Sustainability review of Singapore issuers, and ASIC's early observations on the first Australian sustainability reports, independently identified climate scenario analysis as among the weakest disclosure areas. Most reporting teams built transition risk first, because emissions were the mandated number, and gave physical risk a paragraph.6,7

IFRS S2 and the standards built on it require an assessment of climate resilience using scenario analysis, covering physical as well as transition risk. A historic El Niño is an unusually concrete test of whether that assessment was real.

What to do in the next quarter

  • Rank your origins by teleconnection, not by spend. Your largest supplier is not necessarily your most exposed one. Start from the country list, then drill to plots.
  • Reuse the EUDR file rather than commissioning a new study. The coordinates exist, the supplier relationships exist, and the evidence trail exists. A physical risk screen built on that base is weeks of work, not a consulting engagement.4
  • Ask suppliers about water and irrigation now. Rain fed smallholder production is the exposed tail in palm, cocoa and coffee, and it is where the yield loss concentrates.
  • Check the insurance position before the renewal, not during it. Availability and pricing for climate exposed assets is now an investor question as well as a treasury one.5
  • Model a two year disruption, not a one season one. The persistence in the yield data is the difference between an inconvenience and a margin event.3
  • Write the analysis up while you are doing it. The work required for procurement is most of the work required for the physical risk section of your climate disclosure. Doing it twice is the avoidable cost.

Frequently asked questions

How strong is the 2026 El Niño expected to be?

NOAA's Climate Prediction Center has an El Niño Advisory in effect and reported a July Nino 3.4 anomaly of plus 1.4 degrees Celsius. It assigns a greater than 90% chance of a very strong event during the northern hemisphere autumn and winter of 2026 to 2027, and a 69% probability that the October to December three month index exceeds plus 2.5 degrees, which would exceed every event since 1950.

What is the estimated economic cost of El Niño?

Analysis published by the Peterson Institute for International Economics estimates a first year global output loss of about 986 billion dollars, close to 0.8% of global output, and a cumulative loss of 17.56 trillion dollars over six years, within a confidence interval of 7.2 to 28.5 trillion dollars. Losses fall disproportionately on lower and middle income tropical economies.

Which commodities are most affected by El Niño?

Palm oil is the clearest exposure, because Indonesia and Malaysia produce close to 90% of the global total and both sit in the strongly affected zone. The 2015 to 2016 event cut Malaysian crude palm oil production by 2.64 million tonnes, or 13.2%, in calendar 2016, which the Malaysian Palm Oil Board attributed to prolonged dry weather, with fresh fruit bunch yield down 13.9%. Cocoa, coffee, rubber, sugar and rice are also sensitive.

How does El Niño relate to climate disclosure requirements?

IFRS S2 and the national standards built on it require companies to assess climate resilience using scenario analysis, covering physical risk as well as transition risk. Regulatory reviews in both Singapore and Australia have found scenario analysis to be among the weakest areas of practice. A strong El Niño provides a concrete near term test of whether a company's physical risk assessment reflects its actual supply chain.

Can EUDR data be used for physical risk analysis?

Yes. EUDR requires plot level geolocation to at least six decimal places, with polygons for plots larger than four hectares. Those coordinates can be joined directly to climate hazard layers to produce a supplier level physical risk screen, which is the same analysis investors are increasingly asking companies to disclose.

One supplier map, two regulatory jobs.

EcoLedger holds plot level supplier data with the evidence trail EUDR requires, and the same records feed the physical risk and scenario analysis sections of your climate disclosure. Method, source and owner cited on every figure.

See the platform

References

  1. NOAA Climate Prediction Center, ENSO Diagnostic Discussion, 13 August 2026, accessed August 2026.
  2. Cullen S. Hendrix, Peterson Institute for International Economics, El Niño could drag down the global economy, published 20 July 2026, revised 18 August 2026, accessed August 2026.
  3. Helios, El Niño and palm oil prices: what commodity markets should watch in H2 2026 and 2027, accessed August 2026.
  4. EUR-Lex, Regulation (EU) 2023/1115 on deforestation free products, accessed August 2026.
  5. IIGCC, Supporting investor action on physical climate risk: adaptation and resilience priorities for 2026, accessed August 2026.
  6. SGX RegCo and NUS Centre for Governance and Sustainability, Climate Reporting Review 2024, accessed August 2026.
  7. Malaysian Palm Oil Board, Overview of the Malaysian Oil Palm Industry 2016, and subsequent annual overviews for 2018 through 2024, accessed August 2026.
  8. ASIC, Early observations on sustainability reporting, 18 May 2026, accessed August 2026.

This guide is general information, not investment, procurement or legal advice. Forecasts and economic estimates are inherently uncertain and are reported here as published by the cited sources. Check the primary sources above for the current position.

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