El Niño Market Watch: What Moved This Week, July 17

Two weeks ago we published a map of the commodities most exposed to this El Niño. The conclusion then: no crop had failed yet, but cocoa futures had already moved, and several markets were one bad rainy season away from following. Enough has happened since that a one-off post no longer covers it. So this is the first edition of a weekly series. Every Friday, we round up what moved in El Niño-sensitive markets, what the price action actually traces back to, and what would confirm or refute it.

The rules of the series, stated up front: this is education, not advice. Every price move has multiple drivers, and El Niño is one input among many. Where the connection is speculative, we will say so. Where the market moved the "wrong" way despite El Niño headlines, we will report that too, because that is half the lesson.

The ENSO Backdrop

The latest weekly relative Niño 3.4 reading is +1.47°C for the week ending July 12, well above CPC's +0.8°C relative-index threshold for El Niño (the traditional ONI scale uses +0.5°C; here is why NOAA switched). NOAA's July 9 Diagnostic Discussion holds an 81 percent probability of a very strong event by October-December. That is the forecast every market below is trying to price, months before the impacts it implies would actually arrive.

Softs: The Fear Trade and Its Counterexample

Cocoa and coffee were the week's headline movers, both rising sharply in early July amid a mix of weather concerns, including El Niño-related risks, alongside crop conditions, inventories, currencies, and positioning. The sizes and timing of the moves differed by contract, so we will not pin a single percentage on the pair until we can trace one to exchange settlement data. On the weather side, the mechanisms differ by region: El Niño can alter rainfall and heat patterns across West African cocoa country, home to Ivory Coast and Ghana, although the local response is less consistent than the classic drying signal over parts of Southeast Asia, where Vietnam and Indonesia grow most of the world's robusta coffee. Even there, irrigation and local rainfall matter. Neither crop has failed. The market is pricing a forecast, and forecasts can bust.

The counterweight came from inside the industry: Barry Callebaut, one of the world's largest chocolate processors, said this month that the market enters the coming crop year with surplus stocks and that it does not expect a repeat of the recent cocoa crisis, El Niño risk notwithstanding.

Now the counterexample, and the reason this series exists. Raw sugar, which sits on every "El Niño commodities" list ever written, eased to around 14.8 cents per pound, near two-week lows. Why? Brazil's cane harvest has been progressing in clear weather, and India's monsoon rains improved, even though they remain below average. Same El Niño, opposite price move. Weather risk is regional, inventories matter, and a scary climate forecast does not override a good harvest actually coming in. The decline had limits of its own: firm energy prices and Brazil's ethanol mandate, which diverts cane away from sugar, kept a floor under the market.

Grains: Australia's Ledger Gets Marked Down

ABARES, Australia's agricultural forecaster, expects national winter crop production to fall 21 percent to 54.5 million tonnes in 2026-27, with wheat specifically down 26 percent to 26.7 million tonnes. The pain is sharply regional: New South Wales and Queensland face falls around 37-38 percent, while South Australia and Victoria sit near or above their ten-year averages. The Bureau of Meteorology's outlook gives most NSW cropping regions a 60-80 percent chance of below-average rainfall, the same dry signal we documented in our Australia drought post. El Niño's dry signal is only part of that ledger, though: ABARES also points to reduced planted area, weak wheat margins, sharply higher fertilizer costs, and soil moisture that was already low before this event was declared.

The honest offset: Australia is carrying ample wheat stocks from consecutive strong harvests, which analysts note waters down the export impact of a smaller crop. A 26 percent production cut with full silos is a different market event than a 26 percent cut with empty ones. Rice, the other grain in this story, got its own full treatment on Tuesday: the World Bank's 20-to-50 percent warning, read carefully. Short version: the number is real but conditional, and the biggest price risk is policy, not weather.

Tropical Oils: Palm's Slow Fuse

Indonesia and Malaysia produce the great majority of the world's palm oil, and an FAO drought warning reported this month projects pronounced drying across both from late September 2026 into early 2027. Palm is a slow-fuse market: moisture stress hits fruit formation and bunch development months before the losses show up in production data, which makes palm oil a slower-moving El Niño market than annual crops. Past price responses have varied widely, so we will track the production numbers rather than assert a pattern. For now, palm belongs on the watch list rather than the headline list.

Marine Ingredients: The Market Where El Niño Already Happened

Everything above is forecast risk. Peru's anchovy fishery is the one major El Niño-sensitive market where the damage is already in the actuals.

Peru's production ministry, PRODUCE, imposed a series of localized and temporary closures on the north-central anchovy fishery, the largest single-species fishery on Earth, through April and May, then a broad 15-day suspension within 30 nautical miles of the coast from May 27 to June 10, and finally a wider north-central suspension beginning June 11 that remains in effect with no published reopening date. The stated reason: warm coastal conditions have altered the distribution and availability of anchovy and raised the risk that fishing operations encounter a high proportion of juveniles. By late April, landings had reached roughly 440,000 tonnes, about 23 percent of this year's quota. Any reopening may be full, partial, or gradual, depending on assessments from Imarpe, Peru's marine research institute. ENFEN, Peru's El Niño commission, keeps its Coastal El Niño Alert active and projects the event persisting through the December 2026 to March 2027 southern summer.

The global numbers follow directly. IFFO, the marine ingredients trade body, reports fishmeal production among its reporting members down 26 percent year to date and fish oil down 14 percent, led by Peru, which supplies about 20 percent of global fishmeal in a normal year. IFFO's reporting members cover roughly 40 percent of world fishmeal output and about half of fish oil, so read those figures as a large sample, not a census. Aquafeed producers are already calling June and July the hardest months of their year. And there is precedent for how bad this can get: during the last strong El Niño setup, Peru cancelled its entire first season of 2023, with industry estimates putting the lost fishmeal and fish oil export value above $1 billion. We covered the on-the-ground side of this in our Peru report; this is what the same event looks like on a balance sheet.

The Common Thread

Put the week's moves side by side and the lesson writes itself. Markets where El Niño impacts are still a forecast, like cocoa, coffee, and palm, are moving on probability. Markets where the weather already arrived, like Peruvian anchovy, are moving on landings data. And markets where the competing driver won, like sugar, are ignoring El Niño entirely this week. Layered under all of it is the fuel story we mapped on Wednesday: diesel up 58 percent raises the cost of harvesting, hauling, and processing every commodity on this page, El Niño or not.

What to Watch Next Week

Imarpe's next biomass assessment and any PRODUCE decision on reopening the anchovy season. India's weekly monsoon numbers from IMD, which feed both the sugar and rice stories. BOM's next climate driver update for the Australian rainfall outlook. IFFO's monthly production update. And on the ENSO side, the weekly Niño region SSTs every Monday, with the next CPC Diagnostic Discussion due August 13. Edition 2 lands next Friday.

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