-
-
25 March 2024Market Update: Sweetcorn March 2024Compiling comprehensive data on the sweetcorn market has historically presented challenges due...
-
22 March 2024Market Report: Tomatoes March 2024The global tomato market has witnessed unprecedented volatility and price levels over...
Market Update: Energy July 2022
21 July 2022
OVERVIEW
It is important to reiterate and emphasise the realities of Energy challenges in food production, and how this is a key driver of the price increases we’re currently observing.
The rationing of Gas during the winter in the EU remains a key concern, as this will make production during the post-harvest period extremely expensive. Also, the harsh reality is that this impacts (directly or indirectly) everything that we consume/buy/produce globally.
We can expect this to get worse before it gets better. As such, this will have a significant impact on commodities, below a few examples:
- Expected that commodities will all be impacted in upward trend.
- All commodities impacted due to transport, production, running factories etc.
- Expected to exacerbate the inflation that we are seeing.
- Costs in greenhouses/modified environments will be hit hard.
- Options are to absorb or produce less – this will have huge impact on availability.
- Processed products in general will be hardest hit – tomatoes is a key example (see previous market update).
- Fertilizer prices driven up as a direct impact.
- Reduction in planting areas is now a key fear.
- Dairy market – cost of drying powder has increased (there is no alternative way)
BRENT CRUDE OIL
Brent crude oil went up 35% over the last 6 months – 102 USD per barrel – 58% YoY. There are several well documented factors for this sudden increase and the impact thereof:
- High demand due to fewer supply options in the market.
- Low inventory, below 5 year average and lowest since 2014.
- Only estimated to recover in last quarter of 2022.
- Pricing are currently moving down, but still higher than previous yearly averages.
- OPEC members will not be able to reach targets.
- Russia/Ukraine Conflict
- We saw an immediate impact in February.
- Daily price movement has driven volatility.
- Sanctions
- Retaliation sanctions.
- US banned all imports of oil.
- UK to phase out all imports by end of 2022.
- EU Russian oil embargo – drop in Russian oil exports now lowest since 2020.
- Reduced reliance on Russian supplies.
- Market uncertainty
- Recession fears
NATURAL GAS
- Peaked at £431.9/100therm
- There’s a reliance of natural gasses in the EU.
- Russia is the top producer so the conflict in Ukraine had an immediate impact
- Prices have continued to rise
- US Natural gas rose from Feb – May 2022 by 81USD/100T (UP 25%)
- This is still much cheaper than Russia
- EIA Gas storage expected to be 9% below average in Q3.
- Sanctions
- US sanctions fully removed Russia
- EU to be fully independent from Russia by 2030
- No EU alternatives to Russian supply
- Russia demanding payment in Roubles
- Russia no longer supplying Poland, Bulgaria, Finland and Dutch/Danish companies as they won’t pay in Roubles
- EU to ration energy in the winter – sourcing alternatives is now a must.
ELECTRCITY
- Prices have risen in line with Gas with consumption expected to return to pre-pandemic levels.
- UK exposed to global surge in electricity pricing, 38% rise in 4 weeks leading up to 13 July 2022 – £101.9/MWH – 278% up YoY (this has an indirect impact).
- Below and to the right Italy’s electricity prices that have a direct impact on production.