The Strongest El Niño in a Generation Is Wreaking Havoc on Global Economy

For Clément Ray, chief executive of French insect-protein company Innovafeed, El Niño has been a welcome arrival. “It’s perfect timing for us,” he said.

But fish meal is selling for record-high prices after officials in Peru, the biggest producer of the anchovies used to make it, suspended this year’s catch early. They were worried about El Niño, a planetary dance of weather phenomena that starts with spiking heat in the Pacific and deals out drought and floods across continents. It occurs every few years and got its name—El Niño de Navidad, or the Christ child—from Peruvian fishermen, who long ago realized that Christmas sometimes brought heat that devastated fish stocks.

The anchovy shortage put fly larvae in the money.

“In the last two months we have secured more demand than in the past two years,” Ray said.

Appetite for insect protein is early evidence of an El Niño shock wave across pockets of the global economy. The phenomenon is showing up in the cost of passing through the Panama Canal and in Chilean copper output, and might influence everything from Asia’s rice crop to the powder at Colorado ski resorts.

Scientists monitoring data from satellites and ocean buoys declared the onset of El Niño in June. It is shaping up to be among the strongest in living memory. Ocean temperatures are the highest on record, with this belch of Pacific heat adding to the warming driven by greenhouse-gas emissions.

“There’s a quite clear signal that this is going to be a potentially generationally strong event, and that means it will have economic consequences that are accordingly quite severe,” said Christopher Callahan, a climate scientist at Indiana University.

Callahan’s research suggests that El Niño events can cause trillions of dollars in lost income, particularly in tropical economies. They will become more challenging as the climate warms, scientists say, adding heat to a planet where some extreme-weather events are already intensifying. El Niño is expected to persist into 2027, which is widely forecast to be the hottest year on record.

Among those bracing for impact are shipping companies using the Panama Canal. El Niño is turning the waterway into another chokepoint in a global economy riddled with them, from the Strait of Hormuz to the parched Rhine.

The canal loses 50 million gallons of water whenever a ship passes through, and is replenished by Lake Gatún, its main reservoir. El Niño spells dryness in Panama. Rainfall between May and August was 34% below the historical average.

The canal’s operator said this month it would reduce the maximum number of vessel transits from 36 to 32 by mid-September. The average auction price for ships using the largest locks surged to $2.5 million in recent weeks from typical levels around $800,000 as shippers race to beat the drought. The canal was already unusually busy as shippers avoided Hormuz.

Panama has hired the U.S. Army Corps of Engineers to upgrade the waterway, which yielded $4 billion in tolls in 2025. It has earmarked $2 billion to divert as many as four rivers into the waterway, bolstering three that already feed it.

“We are dealing with a climate crisis when we are at peak capacity, and we have to find new sources of water,” said Ricaurte Vásquez Morales, the Panama Canal Authority administrator.

Elsewhere, excess precipitation is the problem. Chilean copper producer Antofagasta reduced its production forecast after a freak storm deposited 5 million cubic meters of snow into its Los Pelambres mine in July, causing a stoppage.

The mine was beneath an atmospheric river that inundated much of Chile, a rare occurrence that meteorologists said was consistent with a strengthening El Niño.

The lost supply squeezes an already tight market. Copper prices have been setting records, boosted by surging demand from electrification and the metal-intensive data-center build-out.

El Niño could deliver more disruption. In the last episode, from 2023 to 2024, drought sapped hydropower output in Zambia, hitting copper producers. Analysts at research firm CRU said dry weather associated with El Niño is already affecting river-borne logistics at a major mine in Papua New Guinea.

El Niño picks winners as well as losers. For Innovafeed, the priority isn’t maximizing prices but attracting long-term customers of insect protein, Ray said.

A strong El Niño tends to reduce the number of Atlantic hurricanes, potentially benefiting insurers. El Niño could bail out Europe if a mild winter reduces demand for imported liquefied natural gas, analysts at Rystad Energy said.

Winter-sports enthusiasts are praying to Ullr, Norse god of snow, for El Niño to deliver spectacular snowfall over the Rocky Mountains—at least according to a press release issued by Vail Resorts. More snow feeding into the Colorado River would also replenish the reservoirs of Lake Powell and Lake Mead, easing drought across the Southwest.

But economists say the overall impact is likely to be less growth and more inflation, notably in Asia’s emerging economies. A recent Bloomberg Economics study found that consumer prices increase nearly 2 percentage points in Indonesia and the Philippines after an El Niño-influenced drought.

Most exposed are millions of farmers already reeling from higher fertilizer and diesel costs because of the Iran war. At the end of July, conditions around the world were generally positive for wheat, maize, rice and soybeans, according to a recent report by an international crop-monitoring group, but it warned of growing dryness in Asia’s rice fields. India’s monsoon rain is running 13% behind the average level for this time of year.

“Rice in southern and southeast Asia is the big one,” said Andrew Watkins, a climate scientist at Monash University in Australia.

In 2023, with El Niño denting the harvest, India suspended some rice exports, contributing to a run-up in global prices. Governments’ resilience now faces a test.

“We are capable of dealing with challenges, including the challenge of this year’s El Niño, which is said to be the most severe,” Indonesian President Prabowo Subianto said earlier this month. Speaking against the backdrop of wildfires that his government linked to El Niño, he said the country has ample food.

Economists at S&P Global Ratings said preparatory measures, from larger grain reserves to investments in water management, should shield exposed Asian economies—even if “El Niño’s wrath is unavoidable.”

Concerns El Niño will hit harvests are boosting prices for some agricultural commodities, including cocoa and sugar. Some big producers and crop buyers insist they are well prepared. Chocolate producers such as Hershey have said the cocoa market is better supplied now than it was before the last El Niño, when heavy rain followed by drought battered two key producers, Ivory Coast and Ghana. A Hershey representative said that El Niño doesn’t always mean a bad West African crop, and that the company is diversifying its sourcing.

Les Finemore of hedge-fund firm Moreton Capital Partners is among those betting crop prices will rise. He said complacency will leave companies like Hershey exposed.

“We think this is going to be dramatic and it’s going to have severe repercussions,” Finemore said.

While El Niño loads the dice, each event unfolds differently. Many companies are hoping for the best, having made whatever preparations they can. Norwegian salmon producer Mowi was hit in 2016 after warm water in Chilean fjords caused algal blooms that asphyxiated millions of fish. It has sought to stay ahead of El Niño, for instance by using lights to lure salmon to cooler, deeper waters.

“A brewing El Niño this year won’t make it any easier for us, but let’s see,” Mowi CEO Ivan Vindheim said on a recent earnings call. “Knock on wood.”