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CNBC noted that climate scientists are warning that it appears increasingly likely that a planet-warming El Niño will take shape over the coming months, with U.S. meteorologists estimating a one-in-three chance of a “strong” weather event forming in October to December. European climate models point to an even higher probability of a very strong or “super El Niño,” although the so-called spring barrier means that these forecasts can be inaccurate, the report said.
Every energy price spike sparks fears of higher food prices given that fertilizer manufacture is energy intensive and natural gas is used to produce some chemicals, said Paul Donovan, chief economist at Swiss bank UBS, CNBC noted. “However, higher fertilizer prices may not be the biggest agricultural price threat this year, 2026 might produce a super El Niño weather pattern,” Donovan said in a note published in late March.
“In that case, drought and limited water supply might be more important than shortages of nitrogen,” he added.
El Niño occurs when sea surface temperatures rise at least 0.5 degrees Celsius (0.9 degrees F) above average across the central and eastern equatorial Pacific, notes AccuWeather. A super or very strong El Niño is defined when those temperature anomalies exceed 2.0 degrees Celsius, the forecaster said, noting that the threshold has been breached only a handful of times since 1950. The most recent Super El Niño was during the winter of 2015-16.
“In the U.S., an El Niño pattern typically brings more rain to the Midwest and parts of the West during the summer,” said AccuWeather Senior Meteorologist Chad Merrill. “It will likely produce extended periods of dry weather from the Gulf Coast to the East Coast but mixed in will be some heavy pockets of rain.”
WASDE weighs on wheat: The April World Agricultural Supply and Demand Estimates largely lived up to their reputation as a snoozer, delivering no change to U.S. corn or soybean carryout. Wheat carryout, however, was boosted by a modest 7 million bushels on the domestic front and lifted a significant 6.16 million metric tons from USDA’s March estimate.
May SRW wheat lost 5 3/4 cents to $5.74 1/2, while May HRW wheat shed 4 ¾ cents to $5.90 ½. Both hit five-week lows. 5.90 1/2, nearer the daily low and also hit a five-week low
Fragile truce: Ship traffic through the Strait of Hormuz remained at a near-standstill Thursday, two days into the two-week ceasefire agreed by the U.S. and Iran earlier this week. Tensions remain high ahead of direct negotiations scheduled for Saturday in Pakistan.
Oil prices pulled back and stocks were lifted in Thursday’s session after news reports said Israel and Lebanon would begin direct negotiations. Continued attacks on Hezbollah in Lebanon by Israel led Iran late Wednesday to say the ceasefire had been violated.
Meanwhile, President Donald Trump late Thursday warned Iran not to attempt charging tolls on vessels moving through the Strait of Hormuz. “There are reports that Iran is charging fees to tankers going through the Hormuz Strait,” he said in a social media post. “They better not be and, if they are, they better stop now!”
‘A long way in the wrong direction’: The government’s third estimate of fourth-quarter U.S. gross domestic product on Thursday delivered another cut, leaving growth at a paltry 0.5% annualized rate, down from a previous estimate of 0.7% and an initial guess of 1.4%. It marks a significant slowdown from a 4.4% annual pace in the third quarter and 3.8% in the second quarter. “We have come a long way in the wrong direction in a very short time period,” said economist David Rosenberg of Rosenberg Research. The data shows the economy was slowing sharply at the end of last year.
That weakness may have spilled over into the first quarter before the Iran war began at the end of February. The lingering effects of the government shutdown, combined with rising energy costs through the latter part of Q1, suggest that growth may remain under pressure in the near term, although some of that lost economic activity may see a modest mechanical rebound in Q1, said Michael Hewson, senior market analyst at iForex, in a note. “That presents an awkward backdrop for the Federal Reserve, which is now faced with an economy slowing more sharply than expected, even as core inflation remains stubbornly above 3%,” he wrote.
Above target: Speaking of inflation, the core personal-consumption expenditures index, the Fed’s preferred measure of price pressures, came in at 3% year-over-year in February, matching expectations and down from 3.1% in January but well above the central bank’s 2% target. Core PCE strips out volatile food and inflation prices. The headline figure was up 2.8% year over year, in line with January’s reading.
“This morning’s PCE report did not yet capture the inflationary impulse from higher energy prices tied to the conflict with Iran, but tariff passthrough is written all over it,” said Olu Sonola, head of U.S. Economics at Fitch Ratings, in emailed comments. The economist noted that the three-month trend in both core and headline inflation points to inflation running closer to 4%, even before higher energy prices add further pressure to the headline measure.
The February PCE data was delayed due to last fall’s government shutdown. The March consumer price index report due Friday morning will offer the first key read on whether the Iran conflict is beginning to feed more directly into inflation.
- “For the Fed, the combination of tariff passthrough and rising energy costs will be hard to ignore, making a further delay in rate cuts the most likely near-term outcome,” Sonola said.
Ukraine crop estimates cut: SovEcon, a Black Sea grains consultancy, cut its estimate of Ukraine’s 2026 wheat and corn crops due to growing risks tied to fertilizer and fuel supplies..
The wheat crop estimate was trimmed by 1 million metric tons to 23.6 MMT, while corn was cut 1.7 MMT to 28.1 MMT. Concerns over input availability sparked the revision, though planting is proceeding at a normal pace.Weather conditions remain favorable, but tighter access to fertilizers and fuel is expected to weigh on yields, the firm said, noting that a similar pattern was observed in 2022, when strong weather was offset by input shortages, resulting in lower yields.At the same time, export forecasts for 2026/27 saw only minor tweaks, with wheat seen at 20.8 mmt (+0.5 mmt) and corn at 27.0 mmt (unchanged). Persistently weak shipments this season are leading to a buildup of stocks, which is expected to support exports next year despite a smaller crop, SovEcon said.
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