A very strong El Niño just passed 90% probability
A major weather event is now close to certain, and it hits the world's crops at the same moment fertilizer is scarce and expensive. That points at higher food prices in 2027 — and the businesses that sell into farming would be the way to own it.
NOAA now puts the chance of a very strong El Niño this fall and winter above 90%, up from 63% in April. Forecasters expect Australian wheat production to fall by roughly 9 million tonnes in 2026/27, with dryness risk across Southeast Asia and India. Agricultural effects typically lag six to twelve months. Argentina is the rare structural beneficiary, as El Niño usually brings it above-average rainfall.
Opportunity
On its own this is a weather story. It lands, though, on a fertilizer market already badly constrained — urea up roughly 50% since February, Chinese phosphate export curbs extended, and Iranian urea flows now at further risk after this weekend’s escalation near Hormuz. My read: weather and fertilizer are priced as separate stories, and the compounding is what matters — farmers cutting fertilizer application going into a bad weather year is where yield damage turns non-linear. At least one large asset manager already argues El Niño risk is underpriced.
How it could play out
Australian and Asian yields fall through 2027 while under-fertilized acreage in Brazil, India and Africa underperforms at the same time. Grain stocks draw down, prices cycle higher, and food inflation feeds the rate problem. Grain traders, crop inputs, farmland and Argentine agriculture benefit; food-importing emerging markets face budget stress.
Questions worth asking
- Argentina is the only major producer that gains. Under a reform government, is Argentine agriculture — or the market broadly — the asymmetric expression?
- Which grain balance sheet is tightest going into a fertilizer-starved El Niño year: wheat, corn or rice?
- Palm oil is the textbook very-strong-El Niño trade through Indonesian drought. Has it moved yet?
- Which food-importing governments get forced into subsidy spending, and do their bonds reflect it?
- Is a very strong El Niño priced into 2027 crop insurance and reinsurance renewals?
Where to look
- Bunge and ADM — grain traders who earn on volatility and volume
- agricultural commodity funds for direct grain and sugar exposure
- Argentine equities and agricultural exporters — the structural beneficiary
- palm oil producers — the classic drought expression
- farmland REITs and crop insurers — slower, but repricing into 2027 renewals
Sources
WisdomTree, 2026 · Neuberger Berman, 2026 · NOAA outlook, 2026