+3.2°C
Pacific SST anomaly
ECMWF May 2026
36.5B
Litres ethanol projected
2026/27 season
−19%
Corn output drop
2015–16 El Niño
Projected temperature anomaly and drought risk by region · August–October 2026 · Source: Cemaden Technical Note Apr 2026 · ECMWF May 2026 · INMET · Stratis Intelligence
The convergence
ECMWF models project Pacific sea-surface temperature anomalies reaching up to 3.2°C — a threshold extremely rare in the historical record. A Super El Niño, characterised by anomalies above 2.5°C, historically drives severe drought across Brazil's Centre-West and Northeast — the agricultural heartland of the world's second-largest ethanol producer.
Brazil is simultaneously executing its most ambitious biofuel expansion. On April 30, President Lula raised the mandatory ethanol blend in gasoline from 30% to 32% and the biodiesel blend from 15% to 16%. Brazil now operates 31 corn ethanol plants with a combined capacity of 12.93 billion litres per year, with a further 20 under construction. StoneX estimates total cane and corn ethanol production will reach 36.5 billion litres in 2026/27 — corn ethanol up 17%, cane ethanol up 4.4%.
New corn ethanol capacity online (2026)
> 3B litres
Rabobank projection · concentrated in Mato Grosso
Grain output decline — 2015/16 El Niño
−9.5%
Corn production fell 19.1% in the same event
Critical exposure
Most of Brazil's new corn ethanol capacity is concentrated in Mato Grosso and the Centre-West — the region most directly exposed to El Niño-induced drought and reduced precipitation. New processing plants are ramping up precisely in the region and at the time when feedstock supply is most at risk.
Historical precedent is sobering: during the 2015–16 El Niño, Brazilian grain output fell 9.5% and corn production dropped 19.1%. A comparable scenario in 2026 would constrain feedstock supply when it is needed most.
Stratis view
The intersection of a Super El Niño with Brazil's most ambitious biofuel expansion in history is not a tail risk. It is a convergence of two independently high-probability events that have not been adequately priced into sector analysis.
For investors, traders, lenders, and energy companies with Brazilian exposure, this is a scenario that deserves serious attention in the second half of 2026. Feedstock price volatility, logistics disruption in the Centre-West, and hydropower generation shortfalls are the three transmission channels most likely to affect portfolio positions.