Things steadily go from bad to worse, as drought adds to disruption

'The weather has thrown a new twist, with drought threatening what should have been a desperately needed good grain harvest. Meanwhile in London the front leader due to be voted prime minister by a tiny minority has shown she has no understanding of inflation or the havoc its is creating...'

The past few years have certainly felt like living in a drama where things steadily go from bad to worse. This has continued across Europe as it becomes clear drought is not only taking a toll on this year's crops but is setting agriculture up for a difficult autumn planting season.

Rare good news has been that ships carrying grain have continued to get out of the Black Sea ports, but in a good week these carried around 160,000 tonnes of grain. That underlines the challenge in getting access to the estimated 20 million tonnes stored in Ukraine – while concerns continue around Ukraine's ability to grow grain in 2023.

As to the great drought of 2022, it is an ominous sign that the European Commission has published a farm advice document for member states on how they could use urban waste water to increase availability to agriculture. This adds weight to claims that climate change could make water the biggest limiting factor for agricultural productivity.

In the drama of things getting steadily worse and of unintended consequences, the EU has been hit with a reminder that even as the world's biggest agri-trader it is vulnerable to global events. After a long period of month-on-month and year-on-year trade growth, this has stalled in its latest figures – and the stall is on the export side of the equation.

It still has a positive balance of trade between imports and exports, but this is now narrowing. The value of exports fell in April by 5.4% compared to March, although still up by 8% on 2021. This reflected a plunge in trade with China and Russia.

The Chinese drop was understandable, because it was a return to more normal conditions for pigmeat as domestic production recovers in China from a big outbreak of African Swine Fever. This saw EU exports fall by 11%. However the biggest drop in exports was to Russia, which were down by over a quarter – and that was before the full impact of Western sanctions began to show through in figures.

This is a major blow to a number of EU countries that were regular suppliers to Russia, but also to the entire EU as it was a volume market for commodity style products. In the EU trade figures for the first quarter of 2022, one interesting post-Brexit outcome was that its biggest export growth to any country was to the UK. Trade was up 20% compared to the first quarter of 2021.

Imports from the UK were however the exact opposite, with trade dropping more than for any other country – with double digit falls, led by high value products including drinks and confectionery as well as more traditional food products.

This confirms that while Boris Johnson seeks to leave office with claims he 'got Brexit done', this is far from true for his 'easiest trade deal' in history. It remains one-sided to the advantage of the EU, not helped by the UK's continuing inability to implement customs checks on products from the EU.

One big question is why we are still paying such high prices for energy when global oil prices have been falling. One reason is that gas and oil are separate and it is problems around gas that are driving availability and the price crisis, thanks to the ban on Russian gas and the fact that, in a dash to be green, the UK government crippled its own industry.

Oil prices always seem to come down more slowly than they rise and at a costly time for farmers, in terms of demand, diesel prices across Europe are higher than they need to be. Time will tell who wins in this battle between oil companies, now embarrassed by their success, on one side, and governments and consumers on the other.

Because the gas problem links to Russia, that issue is here to stay. That can only mean even more expensive European fertiliser next year, unless somehow the law of unintended consequences finally delivers a positive outcome.