EU crop yields at risk due to extreme weather conditions

The July Monitoring Agricultural Resources (MARS) report has shed light on the state of European crop yields, presenting a diverse picture with most crops hovering around or slightly above the mediocre five-year average. However, some crops, particularly rapeseed and sunflower, have experienced downward revisions of 3% and 4%, respectively, compared to the June report. These yield reductions can be attributed to a combination of adverse factors such as drier than usual conditions and exceedingly high temperatures throughout the growing season that have posed significant challenges for farmers and the agricultural sector across the EU.

According to the MARS report, one of the primary contributors to the worsened yield expectations is the distinctly drier-than-usual conditions that have persisted for over a month in large parts of western, central, and northern Europe, including eastern Romania. These regions have faced limited soil-water supply for crops, further exacerbated by unusually warm temperatures and high radiation levels. As a result, sunflowers suffered the strongest downward revision, with estimates now 5% below the five-year average, primarily due to the worsened yield outlook for Romania, the most significant sunflower seed-producing nation within the EU.

Market players have expressed scepticism about what they consider to still be optimistic yield forecasts, especially for rapeseed, with some suggesting that rapeseed yields in France are down by at least 0.5 metric tonnes per hectare compared to the previous year. This trend, if consistent across the European crop, could lead to further downward revisions and potentially tighten supply from the EU. Furthermore, Mintec has heard of farmers holding back from selling rapeseed in France, anticipating higher prices. A significant export program of barley in July allowed farmers to make room for storing rapeseed, but disappointing yields have supported their conviction.

According to the MARS report, distinctly drier-than-usual conditions were observed across several European countries, affecting regions in Czechia, Austria, northeastern France, the Benelux countries, Denmark, southern Sweden, Finland, most of the Baltic Sea countries, Poland, large parts of Germany, and even southernmost parts of Ukraine. The rain deficit negatively impacted the flowering and grain filling of winter cereals and oilseeds in many of these areas. Furthermore, distinctly warmer-than-usual conditions prevailed in northern France, the Benelux countries, western Germany, and northern parts of the UK. Although these temperatures did not cause significant damage to well-watered crops, the combination of high temperatures and radiation led to very high evaporative demand, exacerbating the negative impacts of limited soil-water supply to crops, even in regions with no exceptional rain deficit, the MARS report suggested.

Taken in isolation, Mintec would assess the report as bullish, although it should be noted that market players, if their yield levels are to be taken into account, would be far more bullish than this report would suggest.

In conclusion, Europe's crop yields are navigating significant challenges amid extreme weather conditions across various regions. Farmers and market players are closely monitoring the situation, as these weather fluctuations can substantially impact crop production and prices, and they may need to digest the report before potentially changing positions.