As long as natural gas prices are at such record high levels, no substantial correction in grain and corn markets is on the horizon. At least this is the opinion of some analysts who point out that with 5% of the natural gas produced annually being used for the production of ammonia and with nutrition being a key factor in crop care, the margins for price retreat are particularly narrow.
Multiplying the impact of the energy crisis has been a prolonged drought across much of central and western Europe, which has seen rivers dry up, fields and pastures dry up and sub-par irrigation calls for vital crops such as maize or the potatoes.
All this is happening against a backdrop of war, with the conflict in Ukraine flaring up over the past 24 hours, a development that has seen agricultural commodity trading centers react by boosting prices on products such as grains and corn, as markets have lost significant their confidence in the plan to release grain from the Black Sea silos.
So energy and drought are reshuffling the deck in European markets, with the first shortages already making headlines. Closed fertilizer plants, closed breweries, shortages of basic raw materials such as glass or aluminum, further congestion in Europe’s ports, especially those that communicate via canals with the major rivers – trade axes such as the Danube or the Rhine. The impact is evident in nearly every area of agricultural processing, from barrel shortages as wineries look to free up their tanks to accommodate this year’s vintage to reduced carbon dioxide availability for breweries bottling and canning their beers. .
No carbon dioxide
Natural gas is vital to Europe’s industry on many levels. In addition to its utilization for the production of fertilizers, by-products of natural gas management, such as carbon dioxide, are increasingly utilized by the food industry. In the public debate, one aspect of the energy crisis even touches on animal welfare, since without access to carbon dioxide, many livestock farms, piggeries and poultry farms, as well as slaughterhouses will not be able to operate and feed the industry under existing regulations. meat processing. Carbon dioxide is critical to food production and packaging, with disruption in the chain catching the industry largely unprepared.
Many now find that the energy crisis was exacerbated by the conditions of prolonged drought in Europe, assessing how one condition fed into the other, while both come together to intensify the imprint of the existing balance on the productive potential of the bloc. In addition to the great damage suffered by crops such as corn and cereals, which Agrenda has reported in recent weeks, it is particularly expected that there will be a reduction in production in potato cultivation. A farmer in western Germany reports that half the crop can be lost due to drought and that even if rains do occur, it is too late. “Nothing will continue to grow here,” he said, while the German agriculture ministry refrained from making a prediction in its August 26 crop report, saying only that the outlook for the potato crop “has deteriorated dramatically.”
The EU’s crop watchdog also cut its monthly potato yield forecast by 2.5%.
In France the situation is even more alarming. Yields there could be at least 20% below the 20-year average, according to French producer group UNPT, based on the latest industry studies. “We can handle the lack of water, but we can’t do anything about heat stress,” emphasize the growers. “This is unprecedented,” they say.
They even emphasize that heat is considered prohibitive for both yields and quality, with the shape and color of the bulbs at risk of being altered by high temperatures. Predictably, this would spell disaster for growers, as their contracts set specific criteria, such as product shelf life.
“It will cost more to the industry, more to the consumer, but the biggest cost will be borne by the farmers,” said the chief executive of the Belgian industrial group Belgapom, while estimating that the country’s harvest could be reduced by up to 30%.
The deputy manager of Maison Antoine, one of the most famous spots in Brussels that sell the famous Belgian potatoes, underlines that the lower quality potatoes will shoot up the prices even more. “It’s too early to say how much, but what’s certain is that they’re not going to go down,” he said.