The Milan Stock Exchange closed 0.7% higher. Raw materials in Europe are worrying

European stock exchanges closed the session on Thursday, August 11 mixed (-0.5% London, -0.1% Frankfurt, +0.2% Amsterdam, +0.3% Paris and +0.7% Milan at 22,857 points) and the BTP/Bund difference ends transactions on the downside at 204 pips basis with the Italian 10-year government bond yield just above 3% at 3.01%. In the union, raw materials are alarming: wheat, oil and gas are flying high, production data worries the leaders of the old continent, and the European Union risks a grain deficit of 200 thousand tons.

Wheat production collapse

According to French agricultural consultancy Strategy Greens, In the 2022-2023 season, corn production in the European Union will drop to 55.4 million tons, hitting its lowest level since 2007. With Europe’s grain stores under attack and the resulting political uncertainty, wheat futures contracts are trading 1.5% higher at $812. But with an annual decline of more than 20%, corn isn’t the only wheat in short supply. According to experts, the decrease in precipitation will mean a decrease in cereal production as a whole by about 8.5% compared to the 2021-22 season. Moreover, estimates predict that European production of soft wheat will also decline by 5% to 123.3 million tons, while barley production is expected to contract by 3.7% to 50 million tons, both below the five-year average. In short, the EU risks a supply deficit of 100,000 tons of corn and barley and 200,000 tons of wheat.

On the fuel front, the news isn’t any better

With periodic cuts in flows from Nord Stream 1 driving up gas prices, Europe has once again turned to oil as an alternative fuel source. Only on Tuesday 9 August, the Russian operator Transneft stopped supplies to the continent via the Druzhba pipeline, and then resumed operations a few hours later. Furthermore, unprecedented temperatures on the Old Continent have put pressure on the region’s grids, resulting in increased demand for electricity for fans and air conditioners in usually quiet times due to energy demand. In its monthly report, The International Energy Agency forecast an increase in oil demand By 2022, from 380,000 barrels per day to 2.1 million. According to the estimates of the Paris agency, the total demand for crude oil in 2022 and 2023, respectively, will reach 99.7 million and 101.8 million barrels per day, an increase of 500 thousand in both cases. The document stated that “oil futures markets indicate that the situation may continue at least until the end of next year.” Currently, both benchmark lists of crude oil are trading around 1.5%, with Brent trading at around $99 a barrel and WTI at 93, while European gas is trading at 206 on a fund of funds basis. %. (All rights reserved)