Hello everyone, thank you for joining our situation brief today: Europe’s Heatwave and the Cost to Supply Chains.
Before we get started, I have a few housekeeping notes. All attendees are muted, but please send questions using the Q&A box on the side of your screen. Please close any extra windows to prevent buffering. We are recording the webinar and will send it out to you within 24 hours.
With that, let’s get started. My name is Anne Sexton, and I’m joined today by my colleagues, Jon Davis, our chief meteorologist, and Mark Russo, our chief science officer. Today Jon and Mark will take us through the impact of these record-breaking temperatures, and we will then take your questions. Now over to you, Jon.
Jon Davis
Great, thank you, Anne. And good day, everyone.
The issue that we’re going to talk about today is the European heat wave and drought. And this, of all the issues around the globe, really so far this year; this has been the issue that has had the greatest impacts overall. With drought situations, it’s not the kind of item where it’s one incident that takes place or a series of incidents that take place. It’s a long-extended period of dry and then hot conditions and the ramifications or the impacts from that occur over an extended period of time. So, we’ll take a look at how this evolved overall and then get into the impacts of what this has meant from a global standpoint, as the biggest problem around the globe so far this year is the European heatwave and drought.
One way to look at this is to look at soil moisture conditions. So, in other words, when we have dry conditions and very hot temperatures, soil moisture conditions drop. And what we’re doing here is we’re looking at soil moisture percentiles. This is back in the middle portion of May, and this is when the drought began to evolve. Back then, the big drought conditions here, the low percentiles in this 40- or 50-year history; it was in Central and Eastern areas of Europe. Poland, for example, was kind of the worst area here overall. And these conditions that started back later on in the spring; it was due to dry conditions back in April and May in a dry spring overall.
Back then, the big drought conditions here, the low percentiles in this 40- or 50-year history; it was in Central and Eastern areas of Europe.
And once we got into the summer, then we saw an expansion and a migration westward of the very dry conditions across areas of Europe. In fact, Western Europe became the epicenter for the heat and the dryness, really centered on France overall, but much of Western Europe is in a situation right now where overall conditions really are unprecedented across these areas. And this is a historically significant drought. Soil moisture percentiles are extremely low when looking at the last 40 years of data. And certainly, those implications that are there are very widespread and very severe out there.
If we begin to take a look at some of the specifics, one of the issues here was the heat waves in the various periods of record heat across areas of Europe. This is one example. It’s in Paris. In looking at the overall maximum temperatures over the last three or four months, the darker blue line, that would be the normal temperatures, what you’d normally tend to see. The yellow line is what we had this summer. And the heat and the number of days that got above 30 and 35 degrees Celsius—again, unprecedented.
Most of the heatwaves, the one in late May, the one in late June, the one in the middle of July, and then a series of heatwaves here into the early portion of August, were at the top end of the historical record. In other words, those are all record-setting temperatures here. Those days have never been hotter as we look back from a historical standpoint overall. And this is not just the case in and around Paris, it’s France, it’s the UK, it’s much of Western Europe, it’s portions of Central Europe, but it’s very widespread across these areas here overall.
Situation was not as severe in the Eastern sections of Europe. Poland, for example, they were not as hot as the Western areas overall. They still had drought conditions, but not as severe in a magnitude or extreme standpoint here as what we saw across Western Europe.
So, let’s talk about some of the impacts, and certainly among the impacts that we have here, agriculture is at the top of the list. This has been an extremely poor growing season across most of Europe, especially Western and Central areas of Europe. So, let’s go over some of those impacts.
The first impact we’ll talk about and probably the biggest impact is agriculture. And its major stress to the overall crops, especially what we call the summer crops, the crops that have developed during June and July and August. And those crops, as we will talk about, have had one of the worst growing conditions or seasons of all time across much of Western and Central Europe. But it expands beyond crops. We’ll also take a look at something else that’s been affected in a major way, milk production, livestock stress, and some of those issues here overall.
So, if we look at agriculture, one way we take the weather information and relate that to overall crops, crop conditions, and different factors like that is through our crop sourcing. It’s our crop sourcing, a product that we’ve developed that monitors crop conditions and yield prospects during this season. We’re going to give an example of that. And that example is France corn. So, if we look at the corn crop in France, this is looking at the season, of course, corn in Western Europe. It’s planted in April and May. It develops in the summer. That’s when yields are either made or lost. And then it’s harvested in late September and October and November.
When we look at how this year, the black line, compares to the last 11 years, this year by far has been the worst. In fact, there’s no year that’s been even close to the amount of negative yield that we’ve seen this year. In other words, the stress that we’ve seen across these areas from that standpoint. And it started early. So even in the middle to end of May, our model was giving indications that this crop in the yield was more poorly rated than any other crop in the last 11 years. And since then, in June and July and early August, the situation has just gotten worse. Again, the impact of this weather on corn in the nation of France is unprecedented. We have never seen a year like this across the region, and this is very common across much of Western Europe overall. So again, those signals were there in late May, when the crop was beginning to deteriorate due to heat, dryness, and lack of soil moisture, and the situation just progressively got worse.
And what this means is that the production of corn in France, the yield of corn in France, is going to be one of the worst. Certainly, in this 11 years, and we’ll also talk about a longer-term history as well from that standpoint. If we compare the model that we do and all the data that goes into that model, and again, in May, it was very evident that things were beginning to go in the wrong direction overall. If we look at public data, for example, it was pretty late in the game—the end of June and July—when we began to see the overall crop conditions from a public standpoint beginning to show very poor conditions across these areas of France overall.
So, another thing, with as bad as this year is, we also wanted to go back and look at the history of this. So, if we go to our next slide, we look at the long-term history.
We have 47 years of very reliable weather data, yield data, soil moisture data, temperature data. And when we average that out across the country of France, and we look at those 47 years in any parameter, temperatures, precipitation, soil moisture, heat stress days, in every situation this year, this is the worst in 47 years. If we look at the rainfall when we average things out across areas of France, if we rank the last 47 years, this is by far the worst. There’s nothing even close to this year. So, the growing conditions in France have been the worst in 47 years. Hottest temperatures, driest conditions, worst root zone, soil moisture situation, worst stress days here overall.
So, again, we’re dealing with a very unique situation that we knew about this months ago, but this is an unprecedented situation, and it’s going to be, if not the worst year, one of the worst years in the Western half of Europe that we’ve ever seen pretty much out there overall.
Another example of the impact, we do quite a bit of work with milk, and this is looking at the weekly accumulation of cow stress. Cows, much like people, are stressed by heat and humidity and the hotter and more humid it is, the more stressed they are and the less milk they tend to produce.
So as of this week, this is an accumulation of stress. It’s all in the summer pretty much for cows, and you can look at how this year compares to the past 11 years. The average is the dash line, and you can see the other 11 years. This year again unprecedented. There’s not been a year like this where you’ve had the combination of temperatures and humidity and extreme stress with the various heat waves across areas of France. So, a major impact from a standpoint of milk production across France and much of Western and Central Europe. And again, it’s going to be one of the worst years ever recorded from the standpoint of severe heat stress on cows, low yields, and low production across the region. And of course, Western Europe being a very major producer on a global basis of milk here overall.
How does this milk stress for cows relate to milk yields in France? Well, of course it’s the worst year. And if we look at the overall milk output model, we call that MOM is the acronym.
This year is the worst year that we’ve seen in the past 11 by a pretty major degree. And that began in late May and accelerated in June, July, and August overall. And from that standpoint, again, the yields this year in summer is what makes the difference. It’s going to be the most stressful summer, and it is going to be the lowest summer for milk yield in France in most of the surrounding areas that we’ve seen here in the historical record. Again, an unprecedented situation overall.
One final example is an area that’s not terrible. If we go into Eastern Europe and look at carrots in Poland, early in the season—back in April and part of May—it was a really bad situation there, but conditions improved with rains and cooler temperatures in Eastern areas of Europe. The overall carrot index, which was the lowest early in the season, is now in the middle of the distribution.
So again, the worst conditions out there have been Western and Central Europe from an agricultural perspective. Eastern Europe is better—not a great year by any means, but not the kind of severe stress and overall crop problems that you’re going to see this year across the Western and Central areas of Europe. So that’s a little bit of an overview of the ag sector and how we quantify the agricultural impact from the historical European drought overall. I’m going to hand it over to Mark, and we’ll talk about some of the other impacts out there.
Mark Russo
Thank you, Jon. Well, certainly agriculture and the food and beverage industries were impacted significantly here, and again, this has been one of the most extreme summers on record, with major impacts seen. And it’s also true for other industries and disruptions to Europe’s supply chain and the effects around the world. In terms of transportation and logistics risks this summer and some of the significant impacts here, again it affected all areas within transportation including rail delays and cancellations, delays for over-the-road transportation, disruptions, delays, cancellations at airports, including not only cargo airports, but significant passenger disruptions as well.
And then, related to agriculture and food and beverage to some extent, we’ve seen an increase in cold chain stress with the severe heat here and the increased need for protection from heat for temperature-sensitive products, whether it’s food, other perishable products, or pharmaceuticals. The risk of issues and the need for cautionary measures to reduce heat stress were significantly enhanced here this summer. And then also we’ve seen significant constraints here on river freight, especially on the Rhine River, which is Europe’s most vital river for supply chain networks and overall transportation.
So, let’s get into some of the more specific details here. And with transportation and logistics risks here, again, with the heat and the dryness this summer that had significant impacts, but as a result of that combination of extreme heat and extreme drought, one of the developments was wildfire activity and significant wildfire activity, especially across areas of France and Spain.
And that started to take place during the latter portion of June and has basically continued since. With the wildfire activity that was triggered and continues to burn here across areas of Western Europe and now even affecting parts of Southeastern Europe in and around Greece and other areas of Southeast Europe, we are now seeing some of the highest number of hectares burn in various countries here across Europe.
Because France saw the most extreme weather conditions of heat and dryness, not surprisingly, we’ve seen the highest number of hectares burned on record for France is what this chart here shows on the left. And this data set goes back nearly 15, 20 years and already by the early portion of July, it was the highest number of weekly cumulative burn areas. And now, as we’ve gone into late July and early August, it has exceeded the highest number at any point in the season. So just phenomenally impressive. And then in Spain, while not the highest number of hectares burned on a record, it did fall within the top three highest. And we saw very extreme wildfire conditions in major population and business zones, i.e. Madrid. It was one of the worst forest fires here ever recorded.
And, as a result of this combination of extreme wildfire activity, it is estimated that over €3 billion in losses are going to take place this year so far, and likely more to come, especially focusing on the wildfire activity in France and Spain. And then besides the increase in burned infrastructure and power grids being offline, because of that we’re also seeing severe disruptions in road and rail traffic, closures of roadways because of the smoke, and readjustments of cargo. So again, another significant impact as a result of the extreme heat, extreme drought and ultimately extreme wildfire situation there.
Another implication we’re going to focus on is the significantly reduced river levels, and what we’ve seen over the past several weeks on river systems such as the Rhine River and the Danube River, which are now seeing basically the lowest river levels on record. And that is having a significant impact here on straining fuel shipments, number of barges on waterways, reduced capacity with some barges reportedly sailing as little as 20% of their normal load capacity, especially on the Rhine River. And this also raises freight costs and requires more vessels for the same cargo volume.
One quick stat here, just to put things a bit more in the context, is that a normal Rhine River barge carries approximately 500 containers. So, with the current situation here, with some barges sailing with as little as 20 percent of normal load capacity, we’re talking about only 100 containers or so on those barges. And again, we’re also seeing impacts on commodities, whether it’s grains or energy commodities like coal, and the situation here is basically as bad as it could be. It could even get worse.
And just because we’re at these historically low water levels, and you can see that here. This is the updated chart for the river level at Kaub, Germany, and these historically low levels, which normally take place in late summer and fall. It’s already taken place now, in mid- to late summer, and we don’t expect any significant improvement over the next few weeks at Kaub, Germany. And while there will be a little bit of an increase in rain activity, it won’t be enough to get Rhine River levels at Kaub, Germany, back above those low-level restriction levels.
And it’s the same situation further up north at Cologne, Germany, historically low water levels. It’s been that way now for numerous weeks. And while there will be a little bit of improvement here coming up, bottom line, we’re not seeing any signs of changing weather pattern across Europe that would significantly improve things. But we continue to monitor the situation closely, continue to forecast when that next window of opportunity could be for improvement. And for the time being, we do not see any significant improvement here with our river level issues here going into September. And we feel it’ll likely continue through a good portion of September, maybe even longer as well.
Finally, energy sector has been significantly impacted by the record setting heat and dryness. We’ve seen impacts with some of the highest cooling demand on record in various countries, including France, due to the extreme heat. We’ve also seen as a result of that, some blackouts and brownouts due to the extreme energy usage as a result of this high air conditioning use in locations that do have air conditioning.
And then, besides disruption of some power grid activity, there has also been some nuclear curtailment, especially in areas of France, which has the highest amount of nuclear power generation across the EU. And because of the reduced water levels, the extremely warm water levels here, whether it’s rivers, whether it’s the water availability in and around these nuclear establishments here, that has also resulted in shutdowns of nuclear plants and overall restructuring of grid operations as a result of these issues.
And then lastly, even solar output and wind, some of the renewables used for energy also have been impacted as well. And then, ultimately, with all these disruptions in power and high demand for power, that has resulted in significant price spikes and some of the highest pricing for this time of year in various energy commodities across Europe.
Here at Everstream Analytics, we produce digests, advisories, and products that monitor Europe’s temperatures, rainfall, and what that means in terms of power generation and air conditioning or cooling demand during the summer, or heating demand during the winter. And we get into more specific analytics with Europe cooling degree days and heating degree days and also wind and renewables and then also disruptions of energy, again, commodities at ports, not only in Europe, but across the world as well, given how now overall energy transportation is now a global phenomenon here overall.
So bottom line here, again, it’s been not only a very extreme summer across Europe, but again, one of the most extreme on record, whether in terms of heat, whether in terms of dryness, especially in Western Europe, and then ultimately in terms of disruptions and impacts on the supply chain networks, and then how that affects areas also around the world.
Q&A
Thank you very much for that insightful session. We’ve had some questions come in, but we only have about a minute left. Will the drought in Europe continue for the rest of the year?
Jon Davis
Yeah, that’s a great question. What’s very interesting about this is that when we look back at drought years in Europe, typically, later in the year—in the middle of fall or early winter—you tend to get into a wetter pattern. Some of that has to do with ocean temperatures. The Mediterranean is at the highest level, temperature-wise, that we’ve ever seen historically. The areas in the Atlantic off the west coast of Europe are also at record highs. That high heat content of the oceans will add moisture to the atmosphere, and typically once we get into the fall—late September, October, November—Europe tends to go wet.
In many of those years, you tend to have an enhanced flood issue and wetness issue across these areas, mainly because those very warm ocean temperatures have to work through the system. And so, as they work through this system, it takes a long time to change those. So typically, the falls tend to go quite wet across a lot of areas of Europe overall. So, to answer your question, it doesn’t look like the drought continues into the fall, and the opposite problem—too much moisture—will likely be the trend that overtakes the supply chain issues across those areas.
But that’s an excellent question.
Conclusion
Unfortunately, we’ve run out of time, but please feel free to send us your questions at [email protected]. Excuse me, the heat has made my throat all dry. Thank you very much for that session, Jon and Mark. It was very informative. Unfortunately, doesn’t seem to be a lot of good news on the horizon coming up towards the later part of the year, but I’d like to thank everyone for giving us their time today and have a great rest of your day. Thank you.