Arabica coffee futures recorded their largest intraday gain since 2000 on Monday, surging 18.5 percent to $3.57 per pound before retreating, in a move the financial services group StoneX described as entering “meme-stock territory”. The rally, driven by algorithmic and institutional buying, came despite analysts noting “no actual weather issue” affecting Brazilian crops. Cocoa futures jumped 13 percent in the same session, pushed by persistent rains in West Africa. The price spikes mark the leading edge of market anxiety over the developing El Niño, which the US National Oceanic and Atmospheric Administration now gives a greater than 60 percent chance of becoming a very strong event peaking between November and January.

That anxiety is already materialising in physical energy systems. India’s hydropower generation fell more than 20 percent in June compared with a year earlier, the steepest drop since February 2024, as reservoir levels sank to a quarter of total storage capacity. The rainfall deficit, which stood at 38 percent below normal at the start of July, has also delayed kharif sowing, with total acreage down 21 percent. In Brazil, grid operators expect the drought to reduce hydroelectric output, but a vastly expanded fleet of solar and wind capacity—now 82 gigawatts larger than during the last severe El Niño in 2021—is likely to absorb much of the shortfall, though thermal plants will still be called upon. Indonesia’s Institute for Essential Services Reform warned that hydropower plants face heightened vulnerability and urged accelerated investment in transmission and storage.

Governments across Asia and Latin America are scrambling to shield farmers and grids. India’s Prime Minister’s Office convened a high-level review, directing ministries to adopt micro-level strategies and accelerate enrolment in the federal crop insurance scheme. Yet as of early July, only 218,000 farmers had signed up, compared with 20.2 million during the previous kharif season, prompting the finance ministry to order insurers to fast-track coverage in 315 vulnerable districts. Malaysia’s fire and rescue department is adding 200 light operations vehicles, 26 drones, and two helicopters to prepare for an expected surge in forest and peatland fires. In Brazil, the national grid operator says current reservoir levels are comfortable, but the real test will come in 2027 if the drought persists.

The immediate milestone is the progression of the Indian monsoon through July, which the meteorological department forecasts will remain below 94 percent of the long-term average. Commodity traders are also watching whether the Intercontinental Exchange raises margin requirements on coffee futures, a move that could unwind the speculative rally. With food inflation already a concern in several large emerging economies, the next factual checkpoint will be the kharif harvest data and the actual intensity of the El Niño as it approaches its expected peak at the turn of the year.