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Europe’s heatwaves slash crop yields and fuel price hikes

Soil cracked due to drought and heatwave.

As Europe faces unprecedented heatwaves this summer, staple crops have been a victim of the hot and dry weather. A reduction in yield could push food prices up in an already fragile economy.

Yield of Europe’s summer crops saw a drop of 8-9% due to an increase in hot and dry weather.

This drop in yield is fuelling unprecedented price increases for food, driven mainly to the conflict in Ukraine.

The agricultural sector must adapt to the impacts of climate change to avoid future price hikes which could cause financial instability and social unrest.

Across Europe, temperatures across the continent have soared to over 40° Celsius this summer, causing a surge in devastating wildfires, increased air pollution and public health emergencies.

The toll of these heatwaves on crops in Europe has been significant. The EU has warned that half of the EU and UK territory is at risk of drought.  With German’s Rhine and Italy’s Po rivers drying up, the EU has published guidance for Member States on how to safely use urban wastewater safely for agriculture.

An EU bulletin warned that the yield outlook for EU summer crops was reduced by 8 to 9% due to the out of the ordinary hot and dry weather in July. This drop in crop yields is well below the five year average.

The main crops affected are grain maize, sunflowers and soybeans. The yield decreases were especially felt in regions affected by long-lasting rain deficit, such as large parts of Spain, southern France, central and northern Italy, central Germany, northern Romania, eastern Hungary, and western and southern Ukraine.

The crop declines are a combination of the extreme temperatures recorded in July and lower-than-usual soil water contents due to below-average rainfall in the preceding months and depleted water reservoirs to sustain the irrigation demand.

Adding fuel to the food crisis fire

The drop in crop yields this summer puts another layer of pressure on the supply of cooking oil and maize in Europe, which have already been impacted due to the Ukraine crisis with Russian president Vladimir Putin blocking the export of grains from Ukraine, one of the world’s major producers.

Globally, food prices have soared to their highest point in history because of the Ukraine crisis. The UN’s Food and Agricultural Organisation (FAO) has warned that food prices could rise by up to 20% because of the conflict, with the price for vegetable oil already showing a sharp increase of 23%.

A reduction in supply of key commodity crops at a time when the market is already struggling to meet demand will add fuel to the cost-of-living crisis that is emerging globally.

“We are in a food, energy and cost-of-living crisis, created by COVID-19, exacerbated by Russia’s invasion of Ukraine”, commented Tim Benton, director of the environment and society programme at Chatham House. “In a disrupted market – where demand globally is exceeding supply – any lost of harvest does not help prices”, he warned.

Steep hikes in food prices are not only negatively impacting the economy, but are also increasing the risk of social unrest as the cost of living for people around the world becomes unsustainable, which could further destabilise economies.

Climate change will continue to exacerbate a food crisis

The yield reduction caused by Europe’s heatwaves this summer was not a one-off occurrence, with declines in agricultural production expected as the impacts of climate change increase in the coming years.

The agricultural sector is particularly vulnerable to climate change, with higher temperatures and shifting precipitation patterns having significant impact on the quantity and quality of crop yields.

Studies show that climate change may reduce agricultural production by up to 17% by 2050. Continued impacts on crop yields due to climate change will have a significant impact on price and thus food security for people around the world.

A report published by the non-profit research centre International Food Policy Research Institute (IFPRI) estimated global prices for staple food crops in a world without climate change. From 2000 to 2050, prices would increase by 62% for rice, 63% for maize, 72% for soybeans and 39% for wheat.

However, when factoring in the impacts of climate change on crops this pushes the price increases significantly higher. Climate change could cause an additional price increase of 32-37% for rice, 52-55% for maize, 94-111% for wheat, and 11-14% for soybeans.

This not only impacts the buying power of consumers, but also significantly undercuts economic opportunities for countries that rely heavily on agricultural exports as a main source of GDP.

Agriculture sector must adapt to climate change

To avoid the worst impacts of climate change on food production and prices, it is crucial that the agricultural industry adapts to the inevitable effects of climate change.

Many companies are already waking up to this reality, and investing in adaptation methods and climate-smart technology in a bid to future-proof their business.

Last month Unilever (LSE: ULVR) , AXA (Euro Stoxx: AXA) and Tikehau launched a €1 billion regenerative agriculture fund to accelerate innovation in developing solutions to better adapt agricultural practices to a changing climate.

This fund will focus on protecting soil health, preserving water resources, contributing to the future supply of regenerative ingredients, and unlocking technological solutions to speed up the transition to regenerative agriculture.

This significant investment signals that there is a market shift towards adapting more sustainable agricultural practices, but more must be done by businesses and governments alike to ensure the agricultural sector is prepared for the looming climate crisis.

A failure to adequately adapt to climate change could lead to financial instability and geopolitical tensions as food becomes rarer and pricier over the coming years.

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