Breaking News

Global Heatwave Pummels Commodities From Texas Cotton to French Power

CommoditiesJul 25, 2018 10:20AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
Global Heatwave Pummels Commodities From Texas Cotton to French Power

(Bloomberg) -- 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 Texas fields, French rivers are too warm to effectively cool nuclear reactors and the Russian wheat crop is faltering.

The scorching heat is extracting a heavy human cost – contributing to floods in Japan and Laos and wildfires near Athens. Relief from soaring temperatures, which topped 30 degrees Celsius (86 degrees Fahrenheit) 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 behavior of plants, animals and the march of the seasons.

The heat and lack of rainfall is pummeling 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, while concerns continue to mount about smaller crops in key growers such as France and Germany. Wheat futures for December have jumped almost 10 percent in the past month in Paris, with prices this week reaching the highest since the contract started trading in 2015.

After years of bumper harvests, global output could drop this year for the first time since the 2012 to 2013 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 (PA:EDF) 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 percent of its power from 58 atomic stations and is a net exporter of electricity to neighboring 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. Solar operators are enjoying the weather, but they can’t fill the gap left by wind and demand for natural gas is rising. French and German day-ahead wholesale power is at the highest for the time of year for a decade, while in Britain they’re the most since at least 2009.

Over 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 last week, 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. Temperatures got so high that the National Weather Service was advising north Texas residents to avoid walking their dogs, lest they burn Fido’s paws. But for farmers in the west of the state, the drought was hurting even more than the heat.

The West Texas cotton belt – the world’s most productive area for the crop – is brown, baked, cracked and dusty. The dryness is so bad that close to half of the state’s crop is in poor or very poor condition, U.S. government data show. About 4.5 million acres of the fiber are planted in the region, 60 percent of which depends on rain because it isn’t irrigated.

"I lost everything in the dry land,” said Lloyd Arthur, a fourth-generation farmer in Crosby County. He’s not expecting to harvest anything from about a quarter of the 2,000 acres of cotton he sowed this season.

Ron Harkey, the president and chief executive officer of the world’s largest cotton warehouse in Lubbock, expects to get 1.5 million bales from members of a growers cooperative in the area this year. That’s down from 2.5 million last season. Tighter supplies have helped drive cotton traded in New York up more than 10 percent this year.

Global Heatwave Pummels Commodities From Texas Cotton to French Power

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email