El Niño Climate Alert & Market Impact Analysis

The Washington Post is now reporting on the El Niño effect and its implications for global agriculture and weather patterns, and the story is directly relevant to the coconut supply chains that TM Duché & Sons operates across. Ben Noll, meteorologist for the Washington Post, flagged publicly that new ECMWF guidance “aggressively predicts the development of a planet-warming El Niño this year, with changes in Pacific wind patterns signalling that a transition is underway.”

This briefing sets out what is happening climatically, what it means for Philippine coconut production and copra supply, and the specific commercial implications for TM Duché clients and sourcing operations in the period ahead.

1. The Climate Picture: What Is Developing and How Fast

The La Niña pattern that characterised the start of 2026 has collapsed rapidly — described by ENSO expert Eric Webb as “the biggest mid-winter collapse of La Niña I’ve ever seen in real-time.” In its place, a powerful oceanic Kelvin wave has been intensifying in the equatorial Pacific, effectively ending the La Niña influence and pointing directly toward El Niño conditions.

The World Meteorological Organisation confirmed the shift in its May 2026 Global Seasonal Climate Update, noting sea-surface temperatures rising rapidly and stating “high confidence in the onset of El Niño, followed by further intensification in the months that follow.” Onset is now forecast between May and July 2026.

The intensity forecasts are striking. ECMWF and NOAA models both suggest the developing event could easily exceed the +2°C super El Niño threshold, with ensemble members pointing toward a historically extreme outcome. For the Philippines specifically:

• PAGASA has set a 92% probability of moderate-to-strong El Niño in Q4 2026, likely extending into early 2027.
• The event is characterised by a longer, more intense dry season and suppressed rainfall across key agricultural regions.
• The 2026 El Niño is developing before the supply effects of the 2023-2024 El Niño have fully unwound — creating a compounded risk environment.

2. Implications for Philippine Coconut Supply

The Production Lag

The critical dynamic in the coconut supply is the production lag. El Niño heat and drought stress affects the coconut palm’s flowering and fruit-set cycles, but because coconut production takes approximately one year from pollination to harvest, the commercial supply impact arrives 12–13 months after the drought event. A strong El Niño peaking in late 2026, therefore, points to meaningful production pressure through 2027 — a window that falls squarely within standard forward contract horizons.

The USDA Foreign Agricultural Service in Manila has confirmed this mechanism directly: drier conditions affect coconut flower growth, reduce nut set, and ultimately constrain copra supply to mills. During the 2024 El Niño episode, 46 coconut-producing provinces were affected, with 62 oil mills across 10 regions impacted by supply constraints.

Current Production Outlook

The Philippine Coconut Authority (PCA) is projecting a production increase in 2026, targeting 16 to 17 billion nuts against 15.3 billion in 2025. This reflects the natural recovery cycle of palms following prior stress events, improved conditions in Mindanao (the country’s primary producing region), and the impact of ongoing fertilisation programmes.

However, the PCA has simultaneously acknowledged that El Niño could cause a 12% decline in coconut exports despite the production increase, reflecting the uneven regional distribution of drought risk. Mindanao is expected to remain relatively well-protected, but central and northern regions face heightened exposure.

Copra Price Dynamics

The PCA forecasts copra prices to rise by P5 to P10 per kilogram in 2026 as El Niño conditions take hold. For context, domestic copra prices in Quezon were already running at P9,250–9,400 per 100kg at the time of this briefing. Any further upward movement compresses processor margins and filters through into elevated desiccated coconut, coconut oil, and virgin coconut oil pricing.

International coconut oil prices reached a record $2,771 per metric ton following the 2023-2024 El Niño supply shock. A renewed El Niño before supply has normalised risks reigniting that price pressure, with downstream consequences across the full product range TM Duché handles.

3. Product-Level Considerations

Desiccated Coconut (DC)

Desiccated Coconut prices are already elevated, with FOB Philippines pricing firm and demand from bakery, confectionery, and plant-based food sectors underpinning the market. El Niño adds a potential supply-side premium on top of existing price levels. Buyers seeking to secure volume for H2 2026 and into 2027 should be aware that long-term contract availability will become increasingly constrained as the season develops — many Philippine exporters are already preferring short-term commitments given uncertainty.

Coconut Oil

The coconut oil supply is the most directly exposed product category. Approximately 80% of Philippine copra production is crushed for coconut oil, meaning that any reduction in copra availability flows directly into reduced oil output. The 62 oil mills across the Philippines are already operating below 70% capacity in some regions due to low copra supply. El Niño will not resolve this; it is more likely to deepen it in affected zones.

Virgin Coconut Oil (VCO) and Coconut Water

Premium product categories, including VCO and coconut water, are somewhat insulated from copra price movements but are not immune to raw nut supply pressures. With 42 VCO processing plants and 14 coconut water facilities in the Philippines, any significant reduction in nut volumes at the farm level will limit throughput across the processing sector.

Banana Chips

Banana chip supply chains, while operating on different crop dynamics, are exposed to the same broad El Niño weather pattern. Sustained dry conditions across the Visayas and parts of Mindanao put stress on banana cultivation alongside coconut. Any TM Duché clients with banana chip sourcing requirements should note this dual-crop exposure in their supply risk assessments.

4. The Wider Commercial Context

El Niño is not the only pressure bearing on Philippine coconut supply chains in 2026.

• US tariff exposure: A 19% US reciprocal tariff is currently applied to Philippine goods, directly pressuring 25-30% of Philippine coconut volumes shipped to North America. This is constraining export economics independently of climate factors.
• Shipping cost surge: Container freight rates on Asia-Europe lanes have risen sharply. Red Sea disruption, Cape of Good Hope diversions, and surcharges from major carriers, including Hapag-Lloyd and CMA CGM, are adding both cost and transit time to shipments.
• EU MOSH/MOAH regulation (2027): The European Union is implementing limits on mineral oil hydrocarbon contamination in food products from 2027. Philippine processors are investing in compliant copra drying technology, but readiness varies across the supply base. This is a significant forward compliance consideration for companies importing into EU markets.
• Pest pressure: Coconut scale insect infestations have affected over 500,000 trees in the Philippines, adding a further constraint on productive capacity beyond weather-related impacts.

5. What the Industry Is Doing: Mitigation Measures

The Philippine government and the PCA are not passive in the face of this threat. The following programmes are either in progress or being accelerated:

6. Recommended Actions for TM Duché Clients

Given all the above, the report recommends clients consider the following:

• Review forward contract positions for Desiccated Coconut, Coconut Oil, and VCO covering H2 2026 and 2027. The window for securing volume at current pricing may be shorter than typical seasonal patterns suggest.
• Monitor PAGASA El Niño intensity updates through Q3 2026. The declared level moderate, strong, or super — will be the key determinant of production impact severity.
• Assess the EU MOSH/MOAH compliance status of current and prospective Philippine suppliers ahead of the 2027 implementation date.
• Flag banana chip sourcing requirements for supply risk review given dual crop El Niño exposure.
• Keep freight cost assumptions under review: current surcharge and diversion conditions on Asia-Europe lanes represent a meaningful landed cost variable that will interact with commodity price movements.

In Summary

A potentially super El Niño is developing faster than initially projected, with a 92% probability of significant impact on the Philippines in Q4 2026 and into 2027. For TM Duché clients, the supply chain consequences are not hypothetical; the last major El Niño event caused total Philippine agricultural losses of P57.78 billion and a 20% reduction in coconut oil exports. The 2026 event is arriving before those wounds have fully healed.

TM Duché will continue to monitor developments and provide timely updates through the weekly briefing series. Clients with specific sourcing concerns or forward contract questions are encouraged to raise them directly with our commercial team.

TM Duché & Sons Ltd  |  Coconut Supply Chain Intelligence Briefing  |  May 2026

Sources: PCA, PAGASA, WMO, ECMWF/NOAA via Carbon Brief & Severe Weather Europe, Philippine Star, BusinessWorld, Manila Times, USDA-FAS Manila, Helios Ingredients, Inquirer Opinion