Louis van Ravesteyn | Head | Agribusiness | Business and Commercial Banking | Standard Bank Group | mail me |
With the 2026-2027 El Niño conditions now established, the latest climate risk assessments suggest Southern African agriculture is better prepared for the period ahead. El Niño conditions have now formed in the Pacific Ocean.
Climate forecasters indicate a high probability that the event could strengthen significantly over the coming months. Moreover, the existing fragile environment and market conditions make this El Niño event even more worrying. Geopolitics, trade frictions, trade route complexities, bio-security events, rising input costs and margin pressures for producers have all contributed to this fragility.
While forecasts point to a potentially severe El Niño, the agricultural sector enters this cycle significantly better prepared than during previous drought periods. Climate risk remains a reality. However, the sector’s investments in resilience, climate-smart agriculture, regenerative farming practices and improved risk management will partly determine its impact.
Climate risks across Africa
While public attention has largely focused on the potential implications of the anticipated 2026-2027 El Niño cycle for Southern Africa, our latest climate risk assessments also identify it as a significant climate risk event for the broader continent. However, its effects are unlikely to be uniform. Impacts are expected to vary by region, sector and level of resilience. As a result, Southern Africa remains a key area of concern. However, the phenomenon is expected to influence agriculture, water availability and broader economic activity differently across African regions.
The 2026-2027 El Niño cycle is expected to increase climate volatility across africa. As such, there ARE heightened risks of drought, heat stress, food insecurity, water shortages, and infrastructure disruption, highlighting the need for early preparedness and resilience planning.
– Kelly Tucker, Senior Manager for Environmental, Social, and Governance Risk at Business and Commercial Banking, Standard Bank Group
Agriculture is expected to rank among the sectors most exposed to the potential effects of the 2026-2027 El Niño cycle. Drought risk, heat stress, changing rainfall patterns and pressure on water resources could affect crop production, livestock operations and broader agricultural value chains across parts of Southern Africa and other regions of the continent.
El Niño conditions have arrived, and the agricultural sector will need to plan accordingly. The event itself could be significant. However, Southern African agriculture is materially better prepared. The investments made across the sector in resilience, technology, water management and climate-smart agriculture will play an important role in determining outcomes over the months ahead.
Stronger foundations for resilience
Southern Africa enters the potential El Niño cycle with several advantages that were not as pronounced ahead of previous drought events. These include improved dam levels following recent rainfall seasons, stronger soil moisture profiles, healthier grazing conditions, advances in seed genetics and stronger carry-over grain stocks resulting from consecutive productive seasons.
Compared with the 2015-2017 and 2023-2024 drought periods, the sector benefits from stronger balance sheets, improved climate intelligence, expanded irrigation capacity, climate-smart agriculture practices and more robust contingency planning. Together, these factors provide a stronger foundation from which to manage potential climate-related disruptions.
Importantly, the sector’s response to climate uncertainty has extended beyond on-farm investments. Across the agricultural value chain, farmers, agribusinesses, technology providers and financial institutions are increasingly collaborating on solutions. These solutions strengthen both environmental sustainability and commercial viability.
One example of this shift towards resilience-focused collaboration is the growing emphasis on regenerative agriculture and sustainable farming practices. This was evident at NAMPO Harvest Day in Bothaville, Free State, in May this year. There, Standard Bank announced a partnership with Orizon Agriculture. The partnership aims to help eligible farming clients generate additional income through regenerative agriculture practices and participation in carbon markets.
The partnership represents South Africa’s first bank-backed regenerative agriculture carbon crop credit programme. It enables qualifying farmers to translate verified improvements in soil health and reductions in on-farm emissions into carbon credits. This creates a potential supplementary revenue stream alongside agricultural production. Through these practices, farmers build resilience on-farm, where drier conditions will be prevalent in this upcoming El Niño cycle.
Building sustainable agricultural businesses
Climate-related risks such as El Niño reinforce the importance of supporting farmers to build businesses that are both productive and sustainable. Investments that improve productivity, water efficiency and long-term sustainability will remain critical to the sector’s long-term competitiveness and adaptability.
Agriculture is one of the sectors most directly exposed to potential El Niño impacts, particularly in Southern Africa. However, vulnerability is not uniform across the sector. Producers that have invested in more sustainable and climate-smart practices and innovations are generally expected to withstand adverse conditions more effectively.
Drought conditions could affect crop yields, livestock productivity, working capital requirements and broader agricultural value chains. Grain producers, livestock and feedlot operators, sugar producers, horticultural businesses and agricultural processing companies could all experience varying degrees of pressure should severe drought conditions emerge.
Dryland farming systems across Southern Africa remain particularly vulnerable to El Niño-related rainfall deficits. While the event is expected to develop during the 2026-2027 summer season, many resulting production, supply chain and market impacts may only become fully evident during 2027. Seasonal conditions and the effectiveness of risk-mitigation measures implemented across the sector will largely determine the extent of those impacts.
Risks beyond the farm gate
The effects could extend beyond the farm gate. They could affect food supply chains, logistics networks, energy security, consumer affordability and broader economic activity. Therefore, businesses and investors will closely monitor potential secondary impacts on inflation, growth and market conditions.
Importantly, while the anticipated El Niño event could amplify risk across specific sectors, geographies and value chains, it is not expected to create a systemic threat. Rather, it is expected to expose differences in operational readiness, financial strength and adaptive capacity across sectors, geographies and value chains.
Lessons from previous drought periods reinforce that approach. Clients that invested in regenerative agriculture practices (climate-smart agriculture), irrigation infrastructure, dams and precision farming technologies generally performed better during the 2023-2024 El Niño cycle. Meanwhile, the bank observed no material deterioration across its primary agriculture portfolio. This demonstrates the practical value of long-term risk-mitigation investments in strengthening the agricultural sector’s ability to withstand climate-related shocks.
Agriculture has always operated in an environment of uncertainty. However, today’s producers have access to better information, stronger technology and more sophisticated risk-management tools than ever before. While no one can control the weather, businesses can control how prepared they are. That preparedness will play a critical role in determining how successfully the sector navigates the season ahead.
Preparing for the season ahead
Producers, seed and other input companies, agribusinesses, financiers, equipment manufacturers and policymakers are gathered there to discuss the outlook for the sector. They are discussing topics such as water security, climate-smart agriculture, technology adoption, productivity improvements and long-term sustainability. These remain among the key themes shaping conversations as the industry prepares for the season ahead.
As discussions continue, Standard Bank believes the focus should extend beyond the risks associated with El Niño. It should also consider the progress the sector has made over the past decade. While climate volatility remains an important consideration, Southern African agriculture enters the 2026-2027 El Niño cycle with stronger foundations, more sophisticated tools and greater capacity to respond than during previous drought periods.
The challenge now is to continue building resilience, maintain vigilance and translate lessons from previous climate events into practical action. In that context, preparedness may ultimately prove more important than the forecast itself.