El Niño Weather Event Expected to Drive Up Food Prices in Israel Post-Holidays

Global central banks and economic research bodies are preparing for the impacts of "El Niño," a climate event originating in the Pacific Ocean that is expected to peak in December. This phenomenon alters weather patterns worldwide, significantly affecting global food prices. These concerns compound existing global food price increases driven by the closure of the Strait of Hormuz and the war in Ukraine. While Israel has so far been insulated from these price hikes due to a strong shekel mitigating import costs, economists predict El Niño's effects will reach Israel after the upcoming holidays.

El Niño is caused by unusually warm Pacific Ocean temperatures, leading to extreme shifts in rain, temperature, and wind. The Israel National Academy of Sciences noted in November that this event, likely to intensify into a "super El Niño" by 2026, will persist through the upcoming winter. While its direct impact on Israeli rainfall is limited, its indirect effects on global food markets and supply chains are a significant concern.

Experts like Professor Eyal Kamchi from the Hebrew University of Jerusalem's Faculty of Agriculture, Food and Environment, anticipate particularly strong effects this autumn and winter. He predicts higher-than-average temperatures and droughts in some areas of Australia, East Asia, India, Central America, and South Africa, while other regions, including the Mediterranean, may experience increased rainfall. Professor Ram Fishman, director of the Porter School of Environmental Studies at Tel Aviv University, links El Niño to human-caused climate change, warning of an exceptionally extreme El Niño event. He highlights that simultaneous agricultural crop failures in multiple regions can cause sharp fluctuations in global commodity and food prices, potentially leading to instability and conflict.

Research by the European Central Bank (ECB) in 2023 indicated that El Niño events consistently raise food commodity prices, with strong events potentially increasing them by up to 9% approximately 16 months after their onset. Specific commodities like soybeans, corn, and rice are most affected, while wheat, coffee, and cocoa show less significant price impacts. Notably, market prices often reflect El Niño concerns even before the event fully manifests. Goldman Sachs analysts have suggested that the predicted intensity of the current El Niño could lead to a nearly 16% surge in global food commodity prices, with ripple effects potentially increasing European food prices by 1.3% and lasting until mid-2028.

Jonathan Katz, chief economist at Leader Investments, points to the ongoing war in Ukraine hindering grain exports and Russia's attacks on storage facilities, alongside rising fertilizer prices from the Persian Gulf via Hormuz, as contributing factors to higher food costs, especially for poorer nations. He notes significant price increases for wheat (42%), corn (22%), and sugar (14%) over the past year, with El Niño concerns already partially priced in. While Israel's import prices rose 2.8% in dollar terms in the first half of the year, a 8.7% strengthening of the shekel offset this, resulting in no net inflation impact on consumers. However, Katz anticipates this mitigating effect is waning as the shekel weakens, predicting a doubling of Israel's food price inflation to around 3.3% in the coming year, particularly after the holidays and into early 2027.