Harvesting Opportunities in Agro Commodities : Navigating El Niño and Dollar Cycles

Agricultural Commodities Outlook

How a strengthening El Niño and a weaker dollar are reshaping cocoa, sugar, soybeans, corn & wheat

El Niño is a climate pattern where the central and eastern Pacific Ocean warms, shifting rainfall, temperature, and storm patterns worldwide.

El Niño conditions are strengthening in August, with equatorial sea surface temperatures above average in the east-central Pacific Ocean, according to NOAA's Climate Prediction Center. This is likely to create a strong El Niño across fall and winter in the Northern Hemisphere and persist through April 2027 at least. By August–October, the probability of strong or very-strong is nearly 100%, climbing further by October–December. El Niño conditions in 2023–24 were the strongest stretch since 2016.

Dollar Weakness

Agro commodities are priced and traded globally in dollars — a softer greenback from Bessent's Treasury buyback expansion and falling yields effectively lowers the cost of these grains for buyers holding euros, yen, or other currencies, which can boost demand when Black Sea supply disruptions are already tightening availability.

The same dynamic that has pushed investors toward gold and the Swiss franc as hedges against dollar debasement can extend to agricultural commodities as well, as some investors apply similar hard-asset, store-of-value logic to food commodities when confidence in fiat currency erodes — though the evidence for this specific spillover into ag futures is thinner than the well-documented flows into gold. Evidence that foreign central banks are trimming Treasury holdings in favor of gold reserves points to a broader diversification trend that could extend to agricultural futures.

A weaker dollar cuts the other way for producers outside the US: because fertilizer and fuel are also priced in dollars, the same currency effect that lowers grain costs for foreign buyers also lowers those input costs in local-currency terms — supporting farm margins abroad rather than squeezing them.

Cocoa

SUPPLY

Cocoa production is highly concentrated — Ivory Coast and Ghana together account for the bulk of world supply, making their weather the single biggest driver of the market. During the last El Niño in 2023–24, West Africa's weather turned damaging in two stages: unusually heavy rainfall triggered black pod disease, then peak-event heatwaves and drought desiccated surviving pods — conditions that helped triple global prices. NOAA has now issued an El Niño Advisory, and farmers are again reporting heavier-than-usual rain.

DEMAND

Global grindings rose 9.95% YoY to 811,671 tonnes. Asian Q2 grindings jumped 25% to 224,646 tonnes, and North American Q2 grindings rose 7.7% to 109,659 tonnes, reversing a forecast contraction. Western Europe was the one soft spot, down 4.6% to 316,366 tonnes.

INVENTORIES & SEASONALITY

Inventories sit at a two-year high of 3.348 million bags — superficially bearish, but stocks were similarly high in 2022 just before the 2023–24 El Niño hit and the market swung into acute deficit. StoneX has narrowed its 2026–27 global surplus forecast to just 25,000 tonnes, down from 149,000. September and October are historically the weakest months as harvest floods the market, but a short crop could flip that pattern into sharp November upside.

Cocoa beans in storage · two-year high at 3.348M · Bloomberg

Cocoa seasonality · Sep/Oct historically weakest · Bloomberg

White Sugar

White Sugar has emerged as one of the strongest-performing soft commodities in August, rallying more than 17% as of August 20, 2026. London futures have advanced for three consecutive weeks, pushing the white-sugar premium over raw sugar back toward elevated levels — a sign of firm demand for refined sugar relative to more abundant raw supplies.

SUPPLY BALANCE

Analysts now forecast global production of 178.5 million tonnes versus consumption of 179 million tonnes, implying a roughly 600,000-tonne deficit; other estimates point to deficits as wide as 1.7–3.3 million tonnes. The 2027–28 forecast deficit widens further to 2.9 million tonnes.

WEATHER & POSITIONING

A strengthening El Niño with >90% probability of becoming very strong threatens drier conditions in India and Thailand, while excessive rainfall could disrupt Brazilian harvesting. Indian domestic prices have risen to record levels, prompting stockholding restrictions and possible duty-free imports. Hedge funds recently reached record bullish exposure to white sugar.

Soybean

Soybeans are supported by strong domestic demand, tightening global inventories, rising energy prices, and improving export prospects. The USDA's August 2026 report projects global ending stocks at 124.21 million tonnes, down from 125.12 million in July, with stocks-to-use falling to 28.1% from 32.3%.

DEMAND DRIVERS

US crushing capacity continues expanding to meet rising soybean oil demand for renewable diesel and biofuels, with crush plants running at the highest utilization levels. The West Asia conflict has disrupted oil flows through the Strait of Hormuz — a route handling roughly 20% of global crude and LNG shipments — lifting crude prices and improving renewable diesel economics. China added a fresh catalyst, confirming purchases of nearly 500,000 tonnes of US soybeans in early August, with traders reporting total buying near 1 million tonnes.

Cocoa beans in storage · two-year high at 3.348M · Bloomberg

Cocoa seasonality · Sep/Oct historically weakest · Bloomberg

Corn

SUPPLY SHOCK

El Niño this year is on track to become the most powerful in 76 years. Brazil accounts for almost 10% of global corn production, and its safrinha crop in Central Brazil is highly rainfall-dependent and planted on a tight schedule after soybeans — making it acutely vulnerable to El Niño-driven drought. A UN report found comparable 2023–24 heat and drought cut corn yields 10–20%. Meanwhile, Pro Farmer Crop Tour data puts Illinois's yield at 184.2 bu/acre, down from 199.6 last year, France is predicting its smallest harvest since 1980, and Black Sea conflict is slowing Ukrainian exports.

DEMAND CATALYST

Rising oil prices have lifted ethanol demand. USDA maintains its estimate of 5.6 billion bushels of corn going to ethanol in 2026–27, up from 5.55 billion the prior year. US ethanol producers consumed 472 million bushels of corn in May 2026 alone, up sharply versus both the prior month and May 2025.

Wheat

Global wheat production for 2026–27 is forecast at 819.1 MMT, down roughly 24.7 MMT from 843.8 MMT the prior year. Global ending stocks are expected to fall to about 275 MMT, while major exporter stocks have been cut from 65.8 to 62.5 MMT — a much smaller exportable cushion even as consumption rises.

RUSSIA & UKRAINE

Russia and Ukraine together are expected to account for more than 30% of global wheat exports in 2026–27. USDA has cut Russia's exports to 46 MMT and Ukraine's to 13.5 MMT, while Russia's August shipments are running at only 3.0–3.4 MMT versus a five-year average near 5 MMT. Ukraine has nearly 23 MMT of unsold grain stranded by export disruptions — increasingly a market-access problem rather than a production one. The conflict has expanded across the Black Sea, with Ukraine targeting Russian export infrastructure and Russian strikes restricting shipping from Ukrainian ports; a quick diplomatic solution appears unlikely.

China holds around 121 MMT of wheat stocks — roughly 44% of global inventories — much of which is unavailable to international buyers. Dry conditions in the southern US Plains could add further supply risk ahead of the 2027 winter wheat crop. Wheat traded around $6.64/bushel on August 19, up about 31% year-on-year.