El Nino Food Inflation Risk Signals Bearish 8.5% Threat

India Monsoon Deficit Sets a Difficult Backdrop

The southwest monsoon opened the 2026 season with a steep shortfall. The India Meteorological Department recorded an all-India June average of 99.5 mm, some 39.8 percent below normal and the fifth-driest June on record after 2014, 2009, 1926 and 1905.

Conditions have improved into July. The cumulative seasonal deficit narrowed to 24.1 percent as of July 5, and the monsoon has advanced across roughly 95 percent of the country.

That recovery matters because July coincides with peak kharif planting. Even so, the IMD has forecast rainfall for the month as most likely to remain below normal, leaving the broader outlook uncertain.

Kharif Sowing Lags Across Key Crops

Kharif sowing acreage trailed last year's coverage by 22.7 percent through June 25. The shortfall was steepest in the crops most exposed to price pressure.

Oilseed plantings lagged 53.3 percent, pulses 30.5 percent and cotton 34.6 percent. A sustained revival in rainfall from late June could close part of these gaps, but the delayed start has narrowed the window for full recovery.

The concern extends beyond the current season. Because El Nino tends to suppress rainfall while raising temperatures, it can produce a short and warm winter that undermines rabi crops such as wheat, mustard, chana, masoor and potato.

El Nino Intensifies Through the Season

The climate signal is strengthening. El Nino is in a moderate phase and is projected to intensify into a strong event during the second half of the monsoon, before turning very strong over October to January.

The National Oceanic and Atmospheric Administration confirmed El Nino conditions were present on 11 June 2026, with a high probability of a very strong event later in the year. The IMD has also lowered its seasonal outlook to 90 percent of the long-period average, placing 2026 in below-normal territory.

The precedent is not reassuring. The last strong El Nino event of 2023-24 drove average retail food inflation above 8.5 percent between July 2023 and December 2024. Without proactive supply-side management, analysts warn of a repeat of that prolonged episode of elevated prices.

Vegetable Oil Imports Anchor the Supply Gap

India's structural import dependence leaves it exposed to any domestic shortfall. The country imported a record 16.9 million tonnes of vegetable oils in 2025-26, meeting well over half of domestic demand from foreign supply.

Palm oil has driven the increase. Industry data show palm shipments almost doubling year on year over the first half of the oil year, supported by favourable price spreads against soft oils, with Indonesia and Malaysia the leading suppliers.

A weaker oilseed harvest would widen that gap further. With domestic edible oil output well short of consumption, any monsoon-driven yield loss translates quickly into additional import requirements and firmer landed costs.

Pulses Import Demand Adds Pressure

Pulses tell a similar story. India imported 7.3 million tonnes of pulses worth roughly 5.5 billion dollars in the prior fiscal year, the highest in its trade history.

That surge followed the El Nino-linked drought of 2023-24, which cut domestic pulses output before a partial recovery. A second consecutive stressed season would keep import demand elevated and sustain upward pressure on retail prices.

For a market already leaning on foreign supply, the timing is difficult. Import windows must stay open to cover shortfalls, even as policymakers seek to protect domestic growers.

Policy Response Will Shape the Outcome

Supply-side management is central to containing the risk. The government faces pressure to keep the import window open while ensuring minimum support prices for pulses, oilseeds, millets and cotton through payment of the difference over open market rates.

Such measures aim to incentivise cultivation of these crops rather than water-intensive rice, wheat and sugarcane. The 2026-27 season will also test the PMFBY crop insurance scheme and rural employment programmes, whose ground-level implementation will matter as much as trade policy.

For commodity markets, the message is clear. A deficient monsoon layered onto an intensifying El Nino has moved climate risk to the front of India's food inflation outlook, with imported oils and pulses set to absorb much of the strain.

Conclusion

India enters the core of the 2026 monsoon season with a narrowing but persistent rainfall deficit, lagging kharif acreage and an El Nino projected to strengthen through winter. The combination revives the spectre of the 2023-24 inflation cycle and points to continued heavy reliance on vegetable oil and pulses imports. The scale of any price shock will depend on how quickly rainfall recovers and how decisively supply-side policy responds.