Heatwave ravages European fields, sending wheat prices soaring
Searing heat has devastated wheat fields across northern Europe while a combination of dry conditions and extreme rain in the Black Sea have hit output estimates, with prices soaring on fears of further crop damage.
Evidence of serious harm to crops is growing as harvesting heads north in Germany, the European Union’s second largest wheat producer, and in Scandinavia, prompting further cuts to estimates for the 28-member bloc.
“The situation is catastrophic in northern Europe,” Strategie Grains head analyst Andree Defois said on Aug. 2.
The consultancy last week cut its forecast for this year’s soft wheat harvest in the EU, collectively the world’s largest wheat grower, below 130 million tons, a six-year low, and Defois said it could revise the estimate again.
France, the EU’s top producer, has also experienced extreme weather, prompting forecasters to cut their estimates to around 34 million tons from 36.6 million harvested last year.
Scandinavia and other Baltic states have also suffered, with Sweden’s wheat crop seen falling 40 percent while in Britain, where wheat crops are expected to fall to a five-year low, farmers are anxiously awaiting results as the harvest moves north.
“It’s far worse than we expected,” Sebastien Poncelet, analyst at Agritel said.
“It has been months since it has rained in some parts of northern Europe and in Germany there should be no rain for at least another two weeks.”
Reacting to the crisis, the European Commission said on Thursday it would speed up payments to farmers hit by extreme drought and allow them to use fallow land that normally would not be used for production to feed their livestock.
Memories of 2007-2008 season
Wheat prices have surged more than 20 percent on European and U.S. markets in the past three weeks on mounting worries over global wheat supplies. Prices were also supported by a severe drought hitting crops in Australia.
Euronext milling wheat futures hit a more than five-year high of 214.50 euros ($249.36) per ton on Aug. 2.
Overall output is seen falling to five-year lows, the International Grains Council said last week after lowering its forecasts for the EU’s top four producers, France, Germany, Britain and Poland.]
Although a further rally in wheat could eventually inflate consumer prices, said Abdolreza Abbassian, chief economist at the United Nations’ Food and Agriculture Organization (FAO), the impact should be curbed by stocks from 2017’s hefty harvest.
Germany’s wheat crop, wilted by the highest May temperatures since 1881, is expected to shrink 25 percent this year, farmers’ association DBV said.
Crops have not been as badly damaged in France, where harvesting had already started as the heatwave hit, and its wheat exporters are now seen as the main beneficiary of their neighbor’s weather woes.
Quality concerns are key in Russia, as it means less wheat of milling or bread-making quality to offer on world markets.
“It is basically clear that the harvest will not reach the last year’s record but it is still going to be relatively large,” said Arkady Zlochevsky, head of the Russian Grain Union.
“The problem is mostly related to the quality.”
Strategie Grains sees the Russian wheat harvest falling 18 percent this year, Defois said.
In Ukraine, which exports the vast majority of its output, the wheat crop was seen falling up to 16 percent to 22-23 million tons after a spring drought and torrential rains in summer, the country’s farm minister said.
Output in Romania, the EU’s third largest wheat exporter, should fall at least 20 percent on the year, Laurentiu Baciu, President of the farmers association LAPAR said.
“Output drops could be even bigger than that, day by day that percentage is increasing and situation in the field is degrading,” he said. “Rains have not stopped for a single day.”