UK wheat is bracing for one of its lowest harvests in decades, according to the National Farmers’ Union (NFU), which is forecasting perhaps the worst crop since the 1980s. “Challenging” weather conditions this year, says the union, have seen quality levels fall to their lowest in some 30 years, even as there are still several variables in play that could prove to prop up output before the harvest is completely through. Severe thunderstorms followed by an extended heatwave this year—even more severe than usual due to the compounding effects of climate change—however, has made predictions more negative than they were just a month or two ago. The NFU now says yields could fall as much as 30-35% year-on-year across the UK with some areas perhaps suf­fering even deeper declines. This would surely put the UK back to the status of net grain importer as its domestic consumption needs will most likely out­strip domestic production.

European Union-based steel consumption fell 12% YoY in the first quarter of the year, according to new data from industry association Eurofer, which has warned that Q2 could show an even deeper decline due to the lockdown effects of the coronavirus crisis. The association already noted that EU steel demand had plummeted by some 50% between March and June after factories shut down or reduced production from April onwards. Steel producers were already facing a dire outlook since the end of 2019 as manufacturing slowed and growth concerns were heightened around the departure of Britain from the EU. Eurofer has continued to call on stronger pro­tections for the European steel industry, including reducing import quotas to avoid flooding the EU market with imported steel. Imports of steel to the EU from non-EU countries fell 20% YoY in Q1, says Eurofer, after declining by 24% in Q4-2019.

Things are not getting any easier for European steel­makers as iron ore prices continue to grow apace, even faster than met coal costs, due in part to Chi­nese import spot fines, putting current CFR prices at US$118/mt. All costs combined to produce pig iron (fines, lump & pellets) have climbed to US$ 178/mt CFR Rotterdam while comparable costs for produc­ing met coke remain at around US$ 60/mt CFR Rotterdam. Even though analysts remind that pig iron costs exceeded US$ 300/mt last year, steel­makers note that steel prices and production vol­umes were notably higher and suitably covered the costs. The spread between raw material costs and European HRC steel remains near the lows seen in June, according to Platts. EU mills continue to push for lower iron ore prices and higher steel prices on their newest contracts even as the converse remains the reality for the time being.

With the French soft wheat harvest having come officially to a close, EU wheat production is officially in danger of coming far under expectations. Current forecasts have the 2020 French harvest down by some 25% versus 2019 after autumn rain followed by summer dryness adversely reduced output this year. Combined with lower output numbers coming out of Romania, Bulgaria and the UK, EU-27+Britain output may approach the drought-driven lows of 128 Mt experienced two years ago. Analysts say it is looking increasingly unlikely that poor EU yields will be offset by better numbers from Poland or the Baltic States. With Germany’s wheat harvest coming to a close in the next week, hopes are high that Ger­man output will help fill the gap with crop estimates of 21-22.6 Mt not far off from last year’s 23 Mt. Paris-based wheat for December is trading at EUR 179.25/mt, down 5% from the start of the year.

Imports of soybeans into the EU and Britain in the 2020/21 season that began in July are so far at 1.37 Mt or 6% lower than the same period last season, albeit only amounting to trade of about five weeks so far. Soymeal imports to the EU amounted to 1.40 Mt in the same period or 30% lower year-on-year, in­dicating that trans-Atlantic grain trades are sliding.

The European Union has re-introduced a tariff on maize imports at EUR 5.48/mt, effective immedi­ately, which will also apply to imports of rye and sorghum. The tariff, which was raised to as high as EUR 10.40/mt in Q2, was originally introduced in April after the commodity downturn connected to the coronavirus pandemic that saw spot prices hit ten-year lows. After EU grain prices recovered, the tariff was re­moved entirely, existing for an extended period of time with the import tariff at zero before it was again re-introduced this week.

Russian coal exports have declined slightly in the year so far, according to new customs data, however Russia still maintained its position as the world’s third biggest seaborne exporter of coal (after Australia and Indonesia). Total coal exports from Russian in the first seven months of the year amounted to 96.1 Mt or 3.9% less than the same period last year. Russian coal volumes to Europe fell by 27.3% YoY to 15.7 Mt in the period, nonetheless offset to a considerably degree by a 16.5% YoY jump in coal to China at 18.1 Mt, indeed helping China to replace Europe as Russia’s biggest buyer of coal.

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