Opinion Focus
- Dry weather across Europe has played havoc with crops.
- Low water levels on inland waterways are threatening fertilisers, energy and trade on a larger scale.
- The fallout is likely to increase inflationary pressure on food and energy.
Heatwaves have swept across Europe this summer, with some areas reporting record high temperatures. As well as being bad news for crops, this could have serious repercussions on the supply chain. Already, water levels on the Rhine and the Danube — both crucial European inland water canals — have reached very low levels that mean barges must travel partially loaded or not at all.
European Dry Weather Persists
Climate change means summer heatwaves are becoming increasingly common in Europe. This year has been no exception. In 2022, the UK recorded its hottest day ever, while wildfires spread across France, Spain and Greece due to hot, dry weather.
In July, rainfall across Europe has only been a fraction of normal.
This has all led to crisis within the food supply chain. Water restrictions mean farmers have been restricted from watering crops, compromising the health of the plants.
In North Europe, another element is added to the weather situation given the dependence of countries such as Germany and the Netherlands on inland waterways as a key trade route. Meanwhile, in Eastern Europe, barges have become a critical means to transport grains from Ukraine to the port of Constanta in Romania for export as an alternative to Ukraine’s own Black Sea ports.
Lack of rainfall coupled with the high temperatures means that rivers across Europe are drying up, compromising the ability to transport goods through the inland waterways. According to the Dutch waterways authority Rijkswaterstaat confirmed that the Rhine is approaching record low levels.
Agricultural Food Supply Under Threat
EU waterways transport about 8 million to 9 million tonnes of exports each year. Agricultural products account for over 20% of inland waterway imports.
Towards the end of the year, between August and December, volumes transported by inland waterways tend to peak. This year, canal water levels are at record lows, putting the brakes on European agricultural trade.
There is another factor to think about in the food supply chain. European countries tend to import much of their fertiliser through sea channels. About 17m tonnes reached Europe in this form in 2021.
But inland waterways are crucial to dispersing the materials from entry ports into landlocked parts of Europe. Germany imported over 1 million tonnes of fertiliser through inland waterways in 2021, much of which came from canals running from the Netherlands.
Farmers are already feeling the strain from low fertiliser availability and high prices.
Many farmers have reported reducing their fertiliser use and increasing farmyard muck application on crops. This is a short-term solution however, and will reduce future yields.
Shipping Issues Impact Energy Availability
Energy products in some months can account for almost 50% of all inland waterway imports.
For Germany, inland waterways account for a huge amount of its energy product imports.
Not only is Germany feeling the pinch but so is Norway. The Nordic country, which relies on hydropower for about 90% of its electricity generation, said at the beginning of the month that low reservoir levels may force it to limit exports.
This reduction in supply, coupled with an inability for Germany to transport its usual volumes of energy products across Europe, is sure to push energy prices up even higher. This will inevitably crunch already-tight margins for farmers.
Knock-on Transport Effects
Roads are already the major source of German imports of agricultural products and live animals; food and animal fodder; metal products; and chemicals.
According to a research paper presented in 2007 at the European Regional Science Association conference, lower levels of water in the Rhine should benefit road transportation rather than rail for both short and long distances.
However, there is a chronic driver shortage. According to the German Economic Institute, almost 12,000 professional driver vacancies cannot be filled across the country.
The reduced capacity for inland transport has also prompted the German government to turn to rail transportation as an alternative. In fact, a proposal is in the works that would give trains carrying coal priority over passenger carriages.
According to a spokesperson for Deutsche Bahn, the German railway company, there are preparations underway to run more coal trains through the autumn. “It is in the nature of things that we do not yet know the exact need and scope,” said the representative, adding that the company is currently engaged in consultations with politicians and the energy industry.
Dryness Extends to Ukraine Export Routes
The situation in Ukraine is only further complicating the situation. Authorities have struggled to release grains from the country, invaded by Russia in February.
Amid a Black Sea blockade, one of the key export routes for the grains was through Romania by rail, truck and barge and onto the international market through the port of Constanta. Barge has by far been the most efficient way to move the grains given logistical issues for rail and road.
However, now the Danube is drying up, cutting off a critical exit route for the grains.
Part of this pressure could be alleviated by a new grain shipment agreement between Russia, Ukraine the UN and Turkey. However, the situation still remains tenuous.
Authorities in Serbia, Romania and Bulgaria have also begun dredging activities to deepen the channels. However, fuel cargoes are being prioritised.
Concluding Thoughts
- The dry weather across Europe is not only impacting primary food production.
- Now food imports have come under threat with the drying up of inland waterways.
- German fertiliser and food import capacity has been severely reduced.
- Key energy products have also been affected, which will throttle Germany’s industrial processing capacity.
- The engine failure of one vessel on the Rhine has created a jam of about 20 vessels, exacerbating the situation.
- Barges on the Danube have also been affected with Ukraine grains cargoes side-lined to prioritise energy.
- This threatens to drive the cost of energy, food and freight up further.
- As a result, these extra costs will feed inflationary pressure.
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