Sweden expects better harvest as global grain prices rise

Sweden's grain harvest is shaping up to be better than initially forecast, offering a glimmer of good news domestically. However, this improved outlook contrasts sharply with a worsening global situation, where the war in Ukraine and extreme weather are driving up grain prices worldwide.

The conflict between Ukraine and Russia, which together account for nearly 30 percent of global wheat and grain exports, has severely impacted supply chains. Ukrainian exports have plummeted, and Russian exports have also suffered due to attacks on Black Sea terminals. Reuters estimates that 97 percent of the countries' export capacity from the Black Sea region has been cut compared to last year.

This disruption, coupled with widespread drought in Europe, Australia, and the United States, has raised concerns about food security. Jens Magnusson, chief economist at SEB, warned of a risk for higher prices for grains and food this autumn, noting significant uncertainty. Ukrainian farmers are also worried about financing next year's planting season without export revenue.

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If you weave together the drought, the war in Ukraine, and the situation in the Strait of Hormuz, there is a risk of higher prices for grains and food in the autumn.

Adding to the global pressure, the UN's Food and Agriculture Organization (FAO) has cautioned that the combined effects of conflicts and the El Niño weather phenomenon will lead to higher food prices through 2026 and into 2027. While Sweden's harvest is improving, the broader international context suggests a challenging period ahead for global food markets.

Despite the global turmoil, Swedish farmers may benefit from the domestic surplus if international supplies remain constrained. The Swedish Board of Agriculture projects a harvest of 5.9 million tons, down from last year's 6.4 million but above earlier forecasts. Per Germundsson, grain manager at Lantmännen, noted that July weather was favorable in parts of Sweden, though regional variations in yield were more pronounced this year due to drought in some southern areas.

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If we have a good harvest and the rest of the world either has bad harvests or cannot export for other reasons, it is of course beneficial for Swedish farmers.