El Niño Is Back, and Forecasters See a Super Event

The Japan Meteorological Agency confirmed Thursday that El Niño has formed across the equatorial Pacific, the first such event since 2023. The agency warned it could become one of the strongest on record, with sea surface temperatures in the key Niño 3.4 region already running more than 2°C above the long-term average. That is the informal threshold for what forecasters call a "super El Niño."

The JMA expects the event to intensify through the northern autumn and persist into at least December. The peak typically arrives in December or January, when the climate pattern exerts its strongest influence on global weather.

A powerful El Niño in 1997 killed at least 30,000 people and caused roughly $100 billion in damages worldwide. A 2023 study from Dartmouth College estimated the lingering economic fallout from El Niños can cost the global economy trillions of dollars, with effects that persist for years after ocean temperatures normalize.

Crop and Energy Exposure

The strength of this El Niño matters for commodity markets. Strong events have historically reduced yields for palm oil, coffee, cocoa, cotton, and grains including wheat and rice, according to Marex, the brokerage and agricultural risk specialist. Palm oil production in Southeast Asia, coffee harvests in Brazil and Vietnam, and wheat output in Australia are all vulnerable to the dry conditions El Niño often brings to those regions.

Even before the JMA declaration, the pattern had already made itself felt. India's monsoon started late, delaying planting for rice and oilseeds. Peru's fishing season was temporarily halted as warmer waters pushed anchovy stocks deeper. Those disruptions are likely to spread and intensify as El Niño reaches its peak.

For energy markets, the effects cut both ways. A cooler, wetter winter across the southern United States could lift heating demand for natural gas and electricity. That would benefit utilities like Southern Company (Alpha Score 44, Mixed), which serves customers across the Southeast. Storm disruptions could offset some of that gain, the net direction depends on how the winter storm tracks develop.

Droughts and wildfires across parts of Australia pose a risk to coal and liquefied natural gas production in the country's eastern states. In 2019, El Niño conditions contributed to the Black Summer bushfires that disrupted coal rail lines and forced mine closures.

The Atlantic hurricane season could see fewer storms than initially feared. El Niño typically increases wind shear across the basin, making it harder for tropical storms and hurricanes to form. Early forecasts from academic institutions, commercial forecasters and government agencies called for about 14 named storms this year, roughly in line with the long-term average. That does not guarantee a quiet season, the odds of a major hurricane landfall in the U.S. are lower than in a neutral or La Niña year.

What concerns many industry and weather observers is the possibility that this El Niño grows into a super event. The JMA's 2°C anomaly projection puts it in that category. The U.S. National Oceanic and Atmospheric Administration uses a different threshold – sea surface temperature at least 0.5°C above average for five consecutive overlapping three-month periods – the agency has not yet declared El Niño conditions. Its next update is due in early June.

A rapid cooling of the equatorial Pacific would reduce the risk. Forecast models from the JMA and other agencies point to continued warming through the summer. The key dates to watch are the JMA's monthly updates and the U.S. Climate Prediction Center's ENSO outlook, which will refine the probability of a super El Niño.

The pattern is set. The question is how strong it gets and which regions bear the brunt. The 1997 event offers a reminder of the scale: 30,000 lives and $100 billion in damages. The Dartmouth study suggests the true economic cost was far higher, spread across years. Markets will start pricing that uncertainty into agricultural and energy contracts in the weeks ahead.