Prolonged dry spells could hit rice, palm oil and corn as higher energy and fertilizer prices add to inflation across Asia.
HONG KONG — Asian economies are confronting a potentially damaging combination of climate and geopolitical pressures, as a looming “super El Niño” threatens agricultural production while the crisis in the Middle East drives up energy and fertilizer costs.
Analysts warn that prolonged dry conditions could reduce crop yields and push food prices further beyond the reach of consumers already struggling with inflation.
“The impact of El Nino is just among the many crises that we are facing at the moment,” said Paul Teng, a visiting senior fellow in the Climate Change in Southeast Asia Programme at the ISEAS-Yusof Ishak Institute in Singapore.
Teng said geopolitical tensions in the Middle East have pushed global oil prices higher, with the effects spreading through Asia’s transportation and agricultural sectors and fueling inflation across the region.
At the same time, what he described as a “fertilizer shock” is creating another source of pressure because the Middle East is a major exporter of crop nutrients.
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Higher Fertilizer Costs Put the Next Harvest at Risk
Rising fertilizer costs are forcing farmers to make difficult decisions over how much they can afford to grow.
Teng said farmers are responding by either reducing fertilizer use or cutting the amount of land they plant this season.
That pressure on agricultural inputs is expected to weigh on harvests during the next crop cycle, creating another potential source of food price increases.
“On top of that is El Nino, which is like adding oil to fire,” Teng told China Daily.
The periodic weather pattern is expected to intensify further from this month, increasing the risks of extreme weather.
Middle East Crisis Adds to Asia’s Inflation Pressure
Oil prices began rising sharply soon after the United States and Israel started attacking Iran on Feb. 28.
The Asian Development Bank, or ADB, said inflation across the developing Asia-Pacific region also increased as the Middle East crisis evolved.
Headline inflation rose from 2.9 percent in January to 4.1 percent in May, driven by higher global energy prices, according to the ADB’s latest economic outlook report published in July.
Since March, governments across the region have introduced measures intended to limit the extent to which higher costs are passed on to consumers.
Those measures include fuel subsidies, tax cuts, price controls, releases from strategic petroleum reserves and energy conservation policies.
Inflationary pressures nevertheless persist. Higher logistics and fertilizer costs are contributing to rising food prices.
The Manila-based ADB expects inflation across the region to reach 4.3 percent by the end of 2026, compared with 3 percent in 2025.
El Niño Could Trigger New Food Export Restrictions
The consequences of a stronger El Niño may extend beyond farms and into international trade.
Japanese investment bank Nomura said in its latest report that El Niño could lead to increased trade protectionism in the coming months.
In previous periods of food price pressure, countries including India, Indonesia and Vietnam have introduced export restrictions or outright bans to prevent domestic food prices from surging.
Such measures can help contain prices within exporting countries, but Nomura said export bans also produce “ripple effects” by driving up costs for countries that depend on food imports.
El Niño Expected to Dominate Climate Patterns Until October
The World Meteorological Organization, or WMO, said in a July 31 report that El Niño continues to strengthen steadily and is expected to dominate global climate patterns until October 2026.
The WMO has also forecast a positive Indian Ocean Dipole, or IOD.
The IOD is a climate pattern defined by differences in sea-surface temperatures that influence regional weather. It can amplify climate impacts across the region, including drought, floods and wildfire risks.
Khor Yu Leng, an economist at Segi Enam Advisors in Singapore, said the combination of El Niño and a positive IOD represents a “higher-risk scenario” for Asian agriculture because it would reinforce dry conditions across most parts of Southeast Asia.
Rice Emerges as the Immediate Food Security Flashpoint
Among Asia’s major agricultural commodities, Khor identified rice as the “immediate flashpoint.”
Rice is a staple food across Asia but is also a thinly traded commodity. That makes its prices particularly vulnerable when weather disruptions are combined with government restrictions on exports.
Khor said these conditions can produce disproportionately large price spikes.
The risk means that worsening dry conditions could have consequences not only for rice-producing countries but also for economies dependent on imported supplies.
Palm Oil Risks Could Take Longer to Appear
The effects on palm oil could follow a different timeline.
Khor said El Niño’s impact on the major cash crop “tends to be more lagged, but potentially broader.”
Dry conditions associated with El Niño can reduce fresh fruit bunch yields several months later. Extreme rainfall and flooding can also interfere with harvesting and transportation.
Unlike rice, palm oil is deeply integrated into global supply chains for food, oleochemicals and biofuels.
Oleochemicals are chemical compounds derived from natural fats and oils, typically of plant or animal origin.
Because of those connections, Khor said tighter palm oil supplies can quickly spill over into both edible oil and energy markets.
Corn Could Become a ‘Hidden Protein Inflation Story’
Corn presents another potential source of food inflation for Asian economies.
Khor described it as the “hidden protein inflation story” because Asian countries depend on corn imports from Brazil and Argentina.
If El Niño damages South American corn harvests, Asian livestock producers would face higher animal feed costs.
The consequences could therefore extend beyond the price of corn itself and into the costs confronting livestock producers.
Climate and Geopolitical Pressures Converge on Asia’s Food System
Asia’s food security challenge is increasingly being shaped by pressures arriving at the same time.
Higher oil prices are raising transportation and logistics costs. More expensive fertilizer is forcing farmers to reduce inputs or planted areas. El Niño threatens to intensify dry conditions, while a positive Indian Ocean Dipole could reinforce climate risks across much of Southeast Asia.
Meanwhile, measures intended to protect domestic food supplies, including export restrictions, could create additional pressure for food-importing economies.
For consumers already dealing with inflation, the convergence of these risks means that developments in energy markets, weather patterns and agricultural production are becoming increasingly connected to the price and availability of everyday food across the region.
