China Consumer Staples Assessing potential impact on price volatility of key input costs

Equity Research 14 September 2026 | 9:19PM HKT

Assessing potential impact on price volatility of key input costs #2 - Super El Niño poses further risk

The emergence of a potential super El Niño (defined as >2°C temperature anomaly) Leaf Liu | has added a new layer of uncertainty to the raw material outlook for global food and Goldman Sachs (Asia) L.L.C.

beverage companies. According to the National Oceanic and Atmospheric Valerie Zhou | Administration (NOAA) (see reports by GS analysts link and link), the current El Niño Goldman Sachs (Asia) L.L.C. cycle is expected to persist from Jun-26 to around May-27 and could become one of Christina Liu | the strongest on record, increasing the likelihood of droughts/floods and Goldman Sachs (Asia) L.L.C. transportation disruptions across key agricultural producing regions. These Adrian Chung weather-related disruptions come at a time when investors are increasingly | focused on cost inflation risks and their potential implications for earnings. Goldman Sachs (Asia) L.L.C.

Among major agricultural commodities, we see the cost of sugar/palm oil/soybeans are most exposed to El Niño-related supply disruptions among our China staples companies’ key input costs, while soybean oil/bean pulp prices are likely to be affected as downstream products of soybeans. Our agriculture analyst, Lina Thomas, highlighted that the producing regions for these commodities face elevated weather risks (link and link), including palm oil from droughts in Indonesia/Malaysia, and sugar from droughts/flooding in Brazil and droughts in India/Thailand. In addition, shipping disruptions caused by declining reservoir levels (Panama Canal) and Hormuz could further tighten global supply chains and amplify commodity price volatility beyond the direct impact of crop production losses, e.g. for soybeans.

While the domestic agriculture goods prices still remain subdued/stable currently (see our Aug cost tracker), we think the import-related price upside risk implications are particularly relevant for the cost trend of China consumer staples companies, given: 1) the sector’s meaningful reliance on imported agricultural commodities (summary table of import reliance of major agricultural goods in Exhibit 1): China remains highly dependent on imports for palm oil/soybeans/barley (80~90%+ import dependence) and palm oil/soybean are critical inputs of instant noodles/soy sauce, while sugar also carries notable import exposure (30%+) and domestic sugar prices tend to follow global trends, and sugar accounts for teens%/up to 20%+ COGS for soy sauce/beverage respectively; and 2) many imported commodity supply chains are concentrated, with the largest source country typically accounting for roughly 50~80%+ of total imports, creating limited flexibility should supply disruptions emerge. As a result, we flag that the raw material cost risks from imported inputs and their potential

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Goldman Sachs China Consumer Staples

correlation to domestic prices that relate to sustained El Niño-related disruptions, if they materialize, could translate into higher input costs for food and beverage manufacturers in 2H26 and 2027, although the exact magnitude and timing remain uncertain (time table in Exhibit 5 based on the GS commodities team’s view). Latest trend: We haven’t seen domestic agricultural goods price rise materially so far (ie. domestic sugar avg. price up 1% mom in Aug/-7% yoy; domestic soy bean avg. price down 0.4% mom in Aug), though international spot prices of multiple key inputs has already significant inflation (sugar/palm oil/soybean/beef avg. price in Sep up +7%/+5%/+20%/+7% price YoY and +9%/+7%/+12%/+4% MoM).

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