JPMorgan Chase provides a timeline: the biggest impact of El Niño on global agriculture will occur in the first quarter of next year.

Risks to the global food supply chain are accumulating rapidly. JPMorgan analysts warn that the intensifying El Niño phenomenon, coupled with global diesel and fertilizer shortages, is expected to have the greatest impact on agricultural production in the first quarter of 2027.

On September 18, Tracey Allen, head of agricultural commodities at JPMorgan Chase, pointed out in a research report that the impact of El Niño on agricultural production is still in its early stages, but is expected to intensify significantly by the beginning of next year.

He cited predictions from the National Oceanic and Atmospheric Administration (NOAA) that El Niño would peak around November and had a 90% probability of evolving into an "extremely strong El Niño" that would last throughout the Northern Hemisphere's autumn and winter.

Currently, the Bloomberg Agriculture Cash Index has risen to its highest level since 2023, and market expectations for a tightening of the food supply chain next year continue to rise.

Although the carryover inventory from the previous quarter was relatively ample, which to some extent buffered the recent impact on the physical grain market, multiple risks are brewing simultaneously.

From record-high diesel prices, geopolitical trade disruptions, and fertilizer shortages, to drought in Europe and a weaker-than-expected spring agricultural season in the United States, the agricultural market faces comprehensive challenges. Tracey Allen stated bluntly in his research report:

There are 99 problems in the agricultural market, and El Niño is just one of them.

Risks are spreading in production areas, threatening multiple crops.

The report provides a detailed overview of the climate pressures faced by major agricultural regions around the world.

In Southeast Asia , persistent drought and wildfires in Indonesian palm-growing regions threaten production; the overall drought in Southeast Asia has also raised concerns about the harvests of Robusta coffee, cocoa, and sugarcane in Thailand.

In India , rainfall from the southwest monsoon is about 15% below the long-term average. While the decline in sugarcane ethanol production has somewhat alleviated the pressure on sugar supply from reduced sugarcane yields, rice, cotton, and oilseed production are facing new risks of decline.

The situation in South America is similarly bleak . Brazil faces a combination of drought and flooding: drought in the north threatens cocoa-producing regions, drought conditions in the central region are putting pressure on soybean and second-season corn growing areas, while excessive rainfall in the south-central region is delaying sugarcane harvesting and may reduce final sugar production. Northern Argentina is also experiencing damp weather, hindering soybean planting.

Agricultural product markets are under technical pressure

Jason Hunter, head of technology strategy at JPMorgan Chase, pointed out that the JPMorgan Commodity Composite Index's agricultural sub-index rose to a multi-year high in August this year.

He also pointed out that if a significant pullback occurs, the previous breakout level will become a new support level , meaning that the technical structure of the market's bullish trend has not changed.

Since this summer, Wall Street has issued a series of warning reports about the risks to the food supply chain next year caused by the combination of El Niño and the energy crisis, and the wording of these warnings has become increasingly severe each month.

JPMorgan Chase's provision of a specific timeline provides a clearer quantitative framework for this brewing supply-side shock.

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