El Niño conditions are expected to rank among the most intense on record in 2026, according to agencies including the U.S. National Oceanic and Atmospheric Administration. In a recent report, the World Meteorological Organization said El Niño was almost certain to persist through February 2027, raising the risk of prolonged extreme heat, floods and drought. Its parent organisation, the United Nations, noted that the WMO had never issued such an unequivocal forecast for El Niño or its cooler counterpart, La Niña.¹

El Niño is the warm phase of the El Niño–Southern Oscillation (ENSO), a naturally occurring 3- to 7-year climate cycle driven by elevated sea surface temperatures in the central and eastern equatorial Pacific. The knock-on atmospheric effects trigger changes in rainfall levels, river flows, and temperatures across the region with highly varied impacts by geography. In Colombia and Panama, conditions are typically drier than usual, while the northern and central coast of Peru tends to see wetter conditions, with more moderate impacts elsewhere in the country. Central Chile also tends to be wetter. Conditions across Brazil are similarly mixed — generally drier in the north and wetter in the south.

Despite uncertainty around strength, the prospect of a super El Niño warrants closer scrutiny at the implication for credits across Latin American electric utilities, agribusiness and protein producers, pulp and paper and India’s agriculture and renewable energy sectors.

1. Electric Utilities

El Niño can produce sharply different generation and pricing effects across Latin American power markets. 

In Colombia and Panama, conditions are typically drier than usual^2,3 while Peru’s northern and central coast, as well as central Chile⁴, typically experience wetter conditions. Similarly, conditions vary across Brazil, being generally drier in the north and wetter in the south.⁵ Areas facing hydro volume shortfalls and hotter temperatures — such as much of Panama and Colombia — can exhibit sharply increased electricity price volatility at spot and higher thermal dispatch. Conversely, regions with improving hydrological conditions, whether through direct precipitation, better snowpack, a strong snowmelt season, or improved runoff hydrology that builds watersheds, can see the opposite dynamic.

Geographic diversification and technology/fuel flexibility, along with contractual protections under power purchase agreements (PPAs) and balance sheet flexibility — created through the practice of traditionally underwriting credits to trough cashflow run rates — are the primary drivers of credit profile outcomes for these utilities. Reservoir positioning of hydro assets is also a critical factor at the margin in determining the timing and magnitude of shifts in cashflows and, relatedly, debt service capacity.

Larger, diversified independent power producers should experience mixed but overall stable credit results, reflecting weaker hydro segment performance, stronger thermal segment results supported by strong positioning in their respective dispatch curves, and balance sheet strength capable of absorbing temporary, modest stress to metrics. Efficient thermal pure plays in hydro-stressed geographies like Panama, however, should benefit particularly strongly in an El Niño environment.  Most Andean hydro-dominant or hydroelectric pure plays should exhibit positive to marginal impact, reflecting unique geographic and watershed positioning across what is a relatively modest number of issuers.
 

2. Agribusiness and Protein Producers

El Niño alters rainfall and temperature patterns, increasing crop-yield volatility and potentially tightening global food supply. The effect depends on where the event coincides with planting, growing and harvesting seasons: yields may improve in some regions while deteriorating in others.
 

Corn

Corn is the clearest pressure point. Global supply and demand were already tight before any El Niño risk materialized. The July USDA forecast called for a global 2026/27 corn deficit of 23.4 million tons, with stock-to-use falling to 21%. Brazilian domestic demand for corn is also rising for feed and ethanol production. In Brazil, the second corn crop is the most exposed to this weather phenomenon. If rain arrives late in the important Center-West region, soybean planting and harvesting can be delayed, compressing the second corn planting window. The second crop represents the bulk of Brazil's corn output, and even a modest disruption can have an outsized effect on domestic corn availability.
 

Proteins

The impact on the protein sector is indirect, transmitted via the price of feedstock and the availability of pasture. If Brazilian corn prices rise, feed costs will rise and margins will compress. Poultry margins are currently around historical averages because lower feed costs have offset weaker chicken prices, while pork margins have already weakened despite favorable feed costs as supply growth has pressured prices. Higher corn prices would therefore hit poultry and pork at a particularly vulnerable time.

Soybeans

Historically, El Niño has been neutral to slightly positive for global soybean yields, with the U.S. and Argentina as the primary beneficiaries. In Brazil, the result is a regional split: southern Brazil tends to benefit from better rainfall, while parts of the Center-West face higher risk from heat, drought, and irregular rainfall.

Rice and Wheat

Drought risk in India and Southeast Asia, coupled with the July USDA forecast for a 2026/27 rice deficit of 5.6 million tons and a stock-to-use ratio falling to 35.6%, highlights significant upside risk for rice prices. Severe drought in Australia can affect wheat prices, and Argentine wheat can also be affected by excess rain and flooding. However, global wheat stocks remain above the historical average and are likely to soften any wheat price increase.
 

Sugar and Ethanol

For Brazil’s Center-South sugar and ethanol industry, greater rainfall may aid cane development but can also interrupt harvesting and crushing and dilute sugar content (TRS/ATR). The global sugar supply and demand balance depends more heavily on Asia: weaker monsoons could reduce output in India and Thailand, supporting sugar prices. Brazilian tax policy and the ethanol blend mandate are also swing factors. Ethanol fundamentals in Brazil are weakening as the supply of corn ethanol expands rapidly, hydrous ethanol prices are under pressure, and domestic demand has not responded strongly even at prices below parity to gasoline.
 

3. Pulp and Paper

For the pulp and paper sector, our focus is on potential supply disruptions in South America and Southeast Asia that could tighten the global pulp supply. In southern Brazil and Chile — where much of the region's pulp mills and plantations are concentrated — wetter conditions raise the risk of flooding, landslides, and logistical disruptions. In Southeast Asia, particularly Indonesia and Vietnam, the opposite dynamic plays out: drier weather elevates drought and wildfire risk that could disrupt woodchip and pulp supply into the global market. Northeast Brazil will also face wildfire and drought risk, though major Latin American pulp producers have limited operations in this region. If these El Niño risks materialize as forecast, we would expect upward pressure on global pulp prices — a potential tailwind for producers that manage to avoid material operational impacts.

Geographical diversification is the main mitigant in this case. Producers operating across regions, products and logistics corridors can absorb local disruption better than smaller, single-asset businesses. The two major Chilean producers face wetter conditions at home and in their Brazilian hardwood operations, although that same rainfall should reduce Chilean wildfire risk and their broader portfolios provide a buffer to any single event. The sector also proved resilient during the 2023–24 El Niño: a major producer operating in the Rio Grande do Sul flood epicentre sustained limited production disruption. We therefore underwrite El Niño as a recurring risk, focusing on asset diversification and operating track record.
 

4. India 

El Niño can directly weaken and destabilise India’s June-to-September monsoon, which supplies about 75%⁶ of annual rainfall and is critical to agricultural irrigation. Monsoon conditions also shape renewable generation: wind plants can produce 50% to 70% of annual output during the season⁷, hydropower reservoirs are replenished and heavier cloud cover suppresses solar output. A weak monsoon may therefore marginally support solar generation while weighing on wind and hydro. S&P Global expects below-normal rainfall under likely El Niño conditions. Rainfall between 1 June and 24 July was 16.1% below the long-period average⁸ and unevenly distributed, compounding the effects on agriculture and power. 

A potential super El Niño in late 2026 presents a differentiated set of credit risks and opportunities across Latin American industries. The differentiating factors are asset diversification, balance-sheet strength and operational track record. Given the complexity, lack of uniform impact, as well as the need to assess second and third tier implications, we remain steadfast in our view that these types of climate events are best assessed via bottom-up fundamental analysis and actively managed. The investment team will continue to monitor the evolution of El Niño conditions and update its credit views accordingly.