What can Asia’s businesses expect from El Nino’s impact on food prices?
Business Times (10/08/2026) - THE Monetary Authority of Singapore’s policy statement on Jul 27 flagged that adverse weather conditions in Singapore’s import sources are expected to lower agricultural output and raise food prices.
Food, retail and other goods inflation is expected to increase alongside the pass-through of imported costs.
The relief that washed through agricultural commodity markets following the easing of the Iran conflict in June also proved short-lived, as renewed tensions in the Middle East have again raised the risk of higher input costs and supply chain disruptions.
Meanwhile, markets have shifted focus to El Nino and its implications for crop production and food prices.
The current El Nino episode emerged in early June and is forecast to strengthen until late 2026, with an 81 per cent probability of reaching a very strong intensity between October and December.
However, for companies and businesses in import-dependent countries such as Singapore, the financial outcome will be driven more by policies at a sourcing level than just the weather.
Exposure on both sides
Asia sits at the centre of global agricultural commodity markets. A weather shock here is not an external event the region absorbs. It is one the region both creates and pays for.
India, Thailand and Vietnam account for nearly half of globally traded rice. Indonesia and Malaysia produce around 85 per cent of the world’s palm oil. India and Thailand are also among the world’s largest sugar exporters.
However, the region also includes major food importers such as Singapore, Brunei and the Philippines.
For Singapore, which imports more than 90 per cent of its food, weather disruptions across regional producers can quickly translate into higher import costs, food inflation and supply chain pressures.
The region’s vulnerability extends beyond agricultural production. Food accounts for around 20 per cent of Singapore’s consumer price basket, while the share rises to 29 per cent in Indonesia and 37 per cent in India, making many Asian economies more sensitive to food-price shocks than developed markets.
Economist Enterprise’s Resilient Food Systems Index, which assesses the resilience of food systems and their exposure to climate-related disruptions, underscores these structural vulnerabilities.
Across the 14 Asia-Pacific countries evaluated, the average score is just 50 out of 100 for physical exposure to climate risks, and 63 for disaster management preparedness as well as mitigation and adaptation.
These relatively modest scores indicate that the same climate shocks that can disrupt global rice, palm oil and sugar markets could also constrain the region’s capacity to produce and deliver sufficient, affordable and nutritious food.
El Nino poses a greater risk to rice, palm oil, and sugar because their production is concentrated in Asia, leaving them vulnerable to localised weather disruptions.
Conversely, crops such as wheat, maize and soybeans are far less vulnerable, as their global spread means dry conditions in Asia and Australia can be offset by better harvests elsewhere, such as Argentina.
Policy response could amplify weather shocks
Since only a small share of global rice production is traded internationally, an export restriction by one large exporter can move prices far beyond what yields justify.
Indonesia’s B50 biodiesel mandate to blend 50 per cent palm oil-based fuel with diesel, in place since Jul 1, is the current version of that risk.
It will absorb an additional three million to 3.5 million tonnes of palm oil into domestic fuel each year. Supply is removed from the export market by policy, precisely as El Nino-linked dryness tightens it.
The pressure will not stop at the food aisle. Crude palm oil, up about a tenth this year, is a major ingredient in soap, detergent and cosmetics.
Cotton futures have climbed roughly a fifth since January, after one of India’s driest Junes in a century delayed planting. Fast-fashion brands sourcing from South and South-east Asian mills can expect higher input costs in the coming months, which is likely to translate into higher prices at apparel stores.
Within the value chain, the effects diverge significantly. Upstream planters gain from higher prices. Crushers, refiners and food manufacturers meet those same prices as an input cost.
Retailers and restaurant operators sit at the end, where pass-through is hardest and volumes are most sensitive when it happens.
How to soften price pressures
Singapore now sources food from more than 180 countries and regions. One of the tenets of Singapore’s official food security regulations and national strategies is its Rice Stockpile Scheme, which requires importers to maintain minimum inventories as a condition of their import licence.
Meanwhile, Singapore Food Story 2 – the country’s national food resilience strategy announced in November 2025 – rests on four pillars: diversify imports, build global partnerships, stockpile and grow locally.
To mitigate the impact of weather and policy risks, businesses can run the same logic: map where a critical input is sourced dominantly from, and look towards diversifying sources early on.
This gives time to vet sources and onboard suppliers to prevent chaos when the inevitable price rise hits.
If businesses identify commodities that are most exposed to policy risks, safety stock stops looking like wasted cash and instead becomes an insurance policy with a clear price tag.
El Nino will pass but the pattern will not. This is the third significant event in roughly a decade and expected to be the strongest one yet. Climate volatility keeps raising the baseline frequency of the shocks that follow.
This poses upside risk to inflation and downside risk to economic growth, given the intensity of the event.
For retailers and consumer goods companies, procurement and pricing decisions taken now will shape margin resilience throughout next year.
Firms that treat this cycle as a one-off weather event will spend the coming months managing a margin problem. Those that use it to build genuinely diversified sourcing are buying an option that pays out every time the pattern returns.