Europe's heat wave may push grain prices higher

Estonian grain growers hope that the heat wave in Central Europe will lift grain prices, which have so far lagged behind rising fuel and fertilizer costs. Meanwhile, Estonia itself is not experiencing a heat wave, and its grain harvest is forecast to be above average. Experts say that panic over potential crop losses can cause market fluctuations, which might actually benefit Estonian farmers.

Margus Ameerikas, development director at Baltic Agro, noted that any kind of panic triggers market fluctuations, and a heat wave is one such trigger — plants do not like to grow in such heat. Tarmo Timmi, CEO of Jaagumäe Farm, recalled that a few summers ago, the grain seemed ready for harvest, but a major heat wave cut yields; the same could happen in Europe.

Ameerikas added that there is no reason to expect crop failure or food shortages. Europe began harvesting before the heat wave arrived. There is no grain shortage: war-torn Ukraine exports six million tons per month; for comparison, Estonia's annual production is 1.5 million tons, two-thirds of which is exported. This year's harvest looks good. The shift from spring grains to winter crops has been beneficial, as winter crops get moisture in autumn and survive the winter. Almost everything survived this winter with only minor damage.

The problem lies in high fuel, energy and fertilizer prices, which were a concern even before the heat wave. Timmi emphasized that in an energy crisis context, transport costs are also rising, and farmers must cover them. Harvesting has not yet begun in Estonian fields but will start in one to two weeks.

Triinu Tapver, a macro-analyst at LHV, said the current heat is not reflected in store prices. However, if scorching heat becomes the norm and heat periods lengthen, it will affect prices through higher energy costs and smaller crops.