Assessing Potential Impact on Price Volatility of Key Input Costs #2 – Super El Niño Poses Further Risk

The emergence of a potential super El Niño (defined as >2°C temperature anomaly) has added a new layer of uncertainty to the raw material outlook for global food and beverage companies. According to the National Oceanic and Atmospheric Administration (NOAA), the current El Niño cycle is expected to persist from Jun-26 to around May-27 and could become one of the strongest on record, increasing the likelihood of droughts/floods and transportation disruptions across key agricultural producing regions. These weather-related disruptions come at a time when investors are increasingly focused on cost inflation risks and their potential implications for earnings. Among major agricultural commodities, we see the cost of sugar/palm oil/soybeans are most exposed to El Niño-related supply disruptions among our China staples companies' key input costs, while soybean oil/bean pulp prices are likely to be affected as downstream products of soybeans. Our agriculture analyst highlighted that the produ