Wildfires scorching the famed vineyards of Bordeaux threaten lives, homes and the economic heart of France’s premier wine country.
As thousands evacuate across fire-ravaged areas of France and Spain, French Finance Minister Roland Lescure has warned of the “serious economic impact” on the region. With soaring temperatures showing no sign of abating, the crisis is set to deepen.
Extreme climate events are transitioning from rare, tail-risk anomalies to systemic, baseline expectations – and bring significant financial impacts to the food industry. From coffee and cocoa to grains and vegetable oils, food supply chains are increasingly vulnerable to climate shocks.
Climate-driven shocks reverberate throughout the food system
Recent climate-driven shocks have put the financial impact of climate-related events into sharp relief.
Following periods of extreme temperatures and poor harvests in West Africa, cocoa prices rose by over 280% between April 2023 and April 2024.
Drought in Europe sent olive oil prices skyrocketing due to the impact it had on growing conditions across Spain and Italy, while consumers faced a 300% price surge for Australian lettuce after devastating floods in 2022.
These events can no longer be dismissed as isolated incidents – they are a preview of a more volatile future.
Meteorologists around the world are increasingly able to forecast how the climate is changing and make projections on future weather patterns.
Business horizons are much shorter than planetary or societal concerns, but even in the next three to five years, the science shows that extreme conditions will become more common.
Once-reliable weather patterns are becoming increasingly erratic and rising temperatures, soil moisture loss, and chronic droughts are actively reducing crop yields and destabilising traditional farming systems.
El Niño 2026 risks to agribusiness
Recent Risilience analysis indicate that a looming Super El Niño will further increase the pressures on an agricultural industry already stressed by fertiliser shortages, inflation, and oil price hikes.
The weather forecasters are worried: the signals suggest that the El Niño conditions officially underway could bring a particularly strong event, attracting media headlines as ‘Super’, ‘Supercharged’ and even ‘Godzilla el Niño, which, the World Meteorological Organization warns, will exacerbate drought and heavy rainfall and increase the risk of heatwaves both on land and in the ocean.
The systemic risk of climate shocks is not confined to the farm it is a downstream corporate liability.
While agricultural producers absorb the initial physical shocks, the ultimate financial exposure rests with the businesses that fail to stress-test how these disruptions propagate through their supply chains.
A drop in agriculture output can lead to vulnerabilities cascading throughout the entire food supply chain, increasing price-volatility risk for manufacturers, retailers, and consumers alike.
Market effects could cascade
In today’s climate reality, a single large-scale climate event, such as a Super El Niño, can trigger correlated failures across different continents and commodities, creating systemic risks that traditional supply chain diversification can no longer mitigate.
Unlike isolated weather events, El Niño creates simultaneous climate shocks across multiple agricultural regions, bringing prolonged drought, flooding and extreme heat to key producing countries at the same time.
Australia, Southeast Asia, South Asia, Central America, parts of Africa and major agricultural regions across the Americas are particularly exposed to these impacts. Rather than disrupting a single harvest or sourcing region, a Super El Niño can affect multiple crops and suppliers concurrently.
Past price shocks struck one commodity at a time. A simultaneous, cross-category surge means the food system could be hit harder and broader than ever before.
Worryingly, market effects could cascade. Price impacts can be heavily amplified by market panic, speculative trading, and government interventions. If El Niño triggers major shortfalls in rice production, it is possible that the governments of India, Vietnam and Thailand could enact export bans to feed their own populations, removing millions of tonnes from the global market and causing prices to escalate.
A significant failure of Australia’s wheat crop could similarly trigger inflationary panic buying in the international markets.
Building resilience before the next climate shock
The business challenge has shifted from simply enduring the next disruption to developing a business model prepared for a world in which volatility becomes a permanent operating condition. To navigate this instability, food corporations are shifting from reactive crisis management to proactive climate resilience.
Forward-looking companies are securing a ‘resilience dividend’ – a strategic advantage protecting corporate earnings during severe shocks.
Building supply chain resilience involves a calculated balance between two complementary approaches: diversifying to de-risk and investing in resilient agriculture. An effective resilience strategy does not treat these as an either/or choice. Instead, it integrates actions from both approaches into a cohesive framework.
Climate risk does not dissipate as it moves down the supply chain – it accumulates and compounds, leaving lasting damage to the corporate balance sheet.
For businesses that fail to financially quantify these upstream vulnerabilities, the true cost becomes visible in eroded margins, structural operational instability, and a drop in enterprise value.
Proactively managing climate risk is no longer a cost centre, but an investment in operational stability, financial predictability, and long-term business solvency.
Workshop with leaders on resilience
Food Manufacture's next Business Leaders’ Forum will focus on resilience in the squeezed middle.
Taking place on 22 October 20206, this key event is designed for food and drink leaders (incl. operational directors, technical leaders, NPD, R&D, C-suite) working for a food and/or drink manufacturers and acts as a platform for honest discussion, networking and collaboration.
Held under the Chatham House rule, the next meeting will provide delegates with actionable ideas to help strengthen resilience and business performance in a volatile, uncertain, complex, and ambiguous (VUCA) world, with guest speakers including renowned preparedness expert, Professor Tim Lang.
About the author
Oliver Carpenter is the vice president of environmental analytics at climate risk and analytics software provider, Risilience.
