Global El Niño Threat Looms Over Food Prices and Markets Ahead of 2027
Global economies brace for a super-El Niño event threatening food prices and supply chains. While a strong shekel previously shielded Israel, economists warn that price hikes will hit local consumers after the holidays.
Central banks and economic research institutions worldwide are preparing for the aftermath of El Niño, a climatic phenomenon that originated in the Pacific Ocean and is expected to peak in December. This event pushes weather systems across the globe, impacting the international economy and particularly food prices.
These concerns compound existing increases in global food prices driven by the blockade of the Strait of Hormuz and the war between Russia and Ukraine. Until now, Israel has remained insulated due to the strengthening of the shekel, which mitigated the rising costs of imported materials. However, economists believe the phenomenon will reach local markets soon after the upcoming holidays.
El Niño is caused by abnormal warming of Pacific Ocean waters, affecting rainfall, temperatures, and wind patterns. The Israel Academy of Sciences and Humanities explained this month that this is an extreme event within 2026, which will persist through the coming winter and has a high probability of developing into a super-El Niño.
What is El Niño?
It is a global climate phenomenon caused by weakening winds and abnormal warming of the Pacific Ocean, leading to extreme temperature and precipitation changes worldwide, resulting in droughts, floods, crop failures, and rising food prices.
Sharp Price Volatility
Prof. Ayal Kimhi from the Faculty of Agriculture, Food and Environment explains that the phenomenon is expected to be particularly strong in the upcoming autumn and winter. "We anticipate higher-than-usual temperatures, and droughts are expected in certain areas of Australia, East Asia, India, Central America, and South Africa. In other regions, including the Mediterranean basin, a higher-than-usual amount of precipitation is expected."
Prof. Ram Fishman, director of the Porter School of Environmental Studies at Tel Aviv University, explains that this phenomenon compounds the climate crisis caused by human activity. "The world is currently entering an exceptionally extreme El Niño event," he warns. "This is a global event, but its impacts vary significantly across different regions."
Research from the European Central Bank (ECB) indicates that a strong El Niño could increase global food commodity prices by up to 16% roughly 16 months after its onset, heavily impacting soybeans, corn, and rice.
Impact on the Israeli Market
According to Yonatan Katz, chief economist at Leader Capital Markets, the escalation of the war between Ukraine and Russia is severely hindering shipments of wheat, soybeans, and other Ukrainian crops from the Black Sea. Katz notes that fertilizer and diesel prices have also risen significantly, increasing transportation costs.
"The very strong appreciation of the shekel prevented these external pressures from rolling over into final consumer food prices in Israel," Katz says, adding a caveat: "In recent days, we have seen the shekel weaken due to weakness in foreign markets and interest rate differentials. I tend to think that for products like food, most of the moderating influence is behind us. In my view, after the holidays and particularly at the beginning of 2027, we will see increases in food prices."
