Automatic translation: Originally published in Finnish 06/08/2026, 04:50 GMT. Give feedback here.

The El Niño weather phenomenon recurs every few years, raising global temperatures, bringing heavy rains to South America, and simultaneously causing droughts in Asia. Its effects can also be seen in our wallets.

EZ: Food price, % change year-on-year

Source: LSEG

The ECB's Economic Bulletin already discussed the impact of extreme weather events on the economy in 2023. One section of the report discussed El Niño, a phenomenon where surface waters are warming up in parts of the Pacific Ocean by at least half a degree Celsius above the long-term average. At that time, the risk of El Niño was high, and it remains so; for example, the US Climate Prediction Center predicts that this year's El Niño will be the strongest in 75 years, with an 81% probability of a "very strong" El Niño in October-December. 

In the economy, this phenomenon is particularly evident in food production: in some cases it causes heatwaves resulting in downpour and in others drought. It is very difficult to forecast regional impacts but the historical analysis presented in the ECB's Economic Bulletin shows that the phenomenon has a widespread effect on increasing food prices. The report states that the temperature fluctuation caused by El Niño “accounts for almost 20% of global commodity price inflation movements since 1963 and that a normal El Niño event tends to raise real commodity price inflation by around 3% for 6-12 months after its emergence, with the strongest contribution coming from food commodities”. If El Niño is strong, global food commodity prices could rise by as much as 9%.

Source: ECB

In 2023-2024, El Niño did not reach its strongest level, but it still caused supply shocks globally. The year 2024 was the warmest in recorded history, causing, among other things, floods that damaged farmers' crops. The year 2023, in turn, was the third driest in the Panama Canal's recorded history, which meant alternative routes had to be found for shipments. Direct links to El Niño are difficult to establish in these cases, but the increasing prevalence of extreme weather events is a reality. 

Naturally, the impacts vary greatly by region if food prices rise sharply. In Western countries, the impact is relatively smaller, as, for example, in the United States, the share of food consumed at home in the consumption basket is only about 8%. In the Eurozone, the share of food is larger, at 19%, but this also includes alcohol and tobacco and does not separate restaurant food into its own category. After the price peak of previous years, the rise in food prices has moderated, and in July, according to Eurostat, it was 1.2% year-on-year. In contrast, in developing countries, the share of food in the consumption basket can rise to one-third, making them more susceptible to food price changes. 

El Niño was also mentioned in the ECB's June meeting minutes as a risk factor for food prices. In the June inflation estimates, food price development was expected to peak in 2027, but largely due to rising energy costs, meaning El Niño was not significantly considered.

Source: ECB

If a stronger El Niño materializes, the weather may hold an inflation surprise at the end of the year, which will tax wallets and force central banks to act. Therefore, an informed investor should also dig out their internal meteorologist and follow El Niño news.