Brazilian analysts expect the inflation effects of El Niño to concentrate later than previously thought, in late 2026 and early 2027. The shift follows technical indications from the Operador Nacional do Sistema Elétrico (ONS), which said at a Programa Mensal de Operação (PMO) meeting that El Niño should reach strong to very strong levels between January and March 2027.
Estimates diverge on the size of the effect
PicPay estimates El Niño will add 60 basis points to the IPCA in the last bimester of 2026, and has incorporated that impact into its projection of 5 percent for 2026 inflation. Warren Investimentos puts the impact at 40 basis points in the last quarter of 2026 and 60 basis points over 2027. In its adverse scenario, Warren sees a food-only impact of 1.30 percentage points for the year.
PicPay economist Matheus Pizzani said El Niño is not the main culprit for a likely breach of the inflation target ceiling in 2026. He pointed instead to the Middle East conflict and oil prices, which he said could add at least one percentage point to inflation.
Timing and insurance gaps
Warren notes that NOAA indications pointed to effects starting in mid-2026, with greater concentration at year-end. FGV Agro’s Felippe Serigati said El Niño should weaken from early 2027, but its effects on inflation lag, concentrating in the first half of 2027.
Ney Dias, CEO of Bradesco Seguros, said potentially affected sectors are not sufficiently protected or prepared, which may intensify the effects next year. Only 3.3 percent of the area planted with grains in Brazil was covered by insurance in the 2024/2025 harvest.
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Source: Office for National Statistics
