Heat wave pummels commodities around the world
Everything from cotton in Texas to wheat in Russia to nuclear power in France affected
LONDON— Commodity producers are having a summer to remember, for all the wrong reasons. A heatwave across swathes of North America, Europe and Asia, coupled with a worsening drought in some areas, is causing spikes in the prices of anything from wheat to electricity.
Cotton plants are stunted in parched Texan fields, French rivers are too warm to effectively cool nuclear reactors and the Russian wheat crop is faltering.
The scorching heat is also extracting a heavy human cost — contributing to floods in Japan and Laos and wildfires near Athens. Relief from soaring temperatures, which topped 30 C in the Arctic Circle, may not arrive for at least two weeks.
It’s a timely reminder of the vulnerability of global commodity markets to the changing climate, as human activity disrupts the behaviour of plants, animals and the march of the seasons.
The heat and lack of rainfall is pummelling crops across Europe as far as the Black Sea. Output in Russia, the world’s top wheat exporter, is set to fall for the first time in six years. Wheat futures for December have jumped almost 10 per cent in the past month in Paris.
After years of bumper harvests, global output could drop this year for the first time since the 2012-13 growing season. This could have political and social ramifications. Egypt, which relies on subsidized bread to feed its almost 100 million people, is already paying the highest price for its imports in more than three years.
French farmers aren’t the only ones finding the weather too hot to handle; the country’s fleet of nuclear power plants is also suffering. Rivers have become too warm to effectively cool the reactors, and Electricite de France SA may be forced to cut output later this week at two stations.
The hot weather also has forced a German coal-fired plant to curb operations and reduced the availability of some plants in Britain fired by natural gas. France gets more than 70 per cent of its power from 58 atomic stations and is a net exporter of electricity to neighbouring countries. Any reductions in output would potentially boost prices across the continent.
The sultry conditions are also leaving wind turbines virtually at a standstill. In Germany, wind output over the past 10 days has been a third lower than the average for the year so far. Windmills are also becalmed in Spain, Italy, the U.K., Denmark and Sweden.
In Texas, power prices are also jumping due to the heat.
The northern part of the state smashed a 93-year-old daily temperature record recently, sending demand surging as people heeded advice to stay indoors and crank up their air conditioning. Wholesale prices for electricity secured a day in advance reached three-year highs, although they’ve since fallen as temperatures moderated.
The West Texas cotton belt — the world’s most productive area for the crop — is brown, baked, cracked and dusty.
“I lost everything in the dry land,” said Lloyd Arthur, a fourth-generation farmer in Crosby County, Texas. He’s not expecting to harvest anything from about a quarter of the 2,000 acres of cotton he sowed this season.