Bloomberg News

U.K. Joins Spain in Drought as Crop Emerge After Winter

April 19, 2012

Spain had its driest December-to-February period in 65 years, the Agriculture Ministry estimates. Photographer: Miguel Riopa/AFP/Getty Images

Spain had its driest December-to-February period in 65 years, the Agriculture Ministry estimates. Photographer: Miguel Riopa/AFP/Getty Images

U.K. farmers, Europe’s third- largest wheat producers, are facing the worst drought in two decades, joining Spanish growers contending with the driest conditions since 1947 as crops emerge from winter dormancy.

Parts of the U.K. had the least rain since 1992 in the six months through March, the U.K. national weather service said. Spain had its driest December-to-February period in 65 years, the Agriculture Ministry estimates. The west part of France, the region’s top wheat grower, had as little as 42 percent of normal rain this year, European Union data show. There is also lower- than-average precipitation in Germany, where a February cold snap damaged crops, farm lobby Deutscher Bauernverband said.

“The next 10 weeks are going to be the key driving period for yields,” said Jack Watts, a senior analyst at the Home- Grown Cereals Authority, an industry funded crop researcher in Kenilworth, England. “There’s still a long way to go.”

Weather threats to European crops come at a time when the International Grains Council is forecasting record global cereals production. Wheat prices tumbled 24 percent and corn 20 percent in the past year on mounting confidence that farmers are catching up with demand. World food prices are now 9.3 percent below the record in February 2011, United Nations data show.

Milling-wheat traded on NYSE Liffe in Paris, a European benchmark, climbed 3.6 percent this year as futures on the Chicago Board of Trade declined 4.3 percent. The Standard & Poor’s GSCI Agriculture Index of eight commodities retreated 2.7 percent while the MSCI All-Country World Index of equities gained 8.8 percent.

Trading Commission

Money managers have been betting on declining wheat prices since mid-September, according to data from the U.S. Commodity Futures Trading Commission. They were the most bearish in six weeks as of April 10, the data show.

Farmers across the 27-nation EU will plant a total of 22.7 million hectares (56.1 million acres) of soft wheat this season, 2.6 percent less than estimated in January, according to Paris-based Union InVivo, the largest French wheat exporter. Soft wheat is used for bread, cookies and cakes. Crops “emerged under drought conditions in several areas,” said Christopher Narayanan, the head of agricultural commodities research at Societe Generale in New York.

Wheat surged 47 percent in 2010 as Russia and Ukraine restricted exports after drought decimated their crops. Prices tumbled 18 percent last year after those curbs were lifted and the global harvest expanded to a record. The London-based IGC estimates world wheat output at 681 million metric tons this year, 2.2 percent less than the record in 2011. All cereals output will be a record 1.876 billion tons for 2012-13, it said.

Environment Agency

Southeast and south-central England, the U.K.’s biggest wheat-growing areas, had about 10.9 inches of rain on average in the past six months, the driest for the period since 1992, said Sarah Holland, a spokeswoman for the Met Office, the U.K.’s national weather service. Dry weather may persist through the end of December, the Environment Agency said April 16.

Spain’s average rainfall in the three months ended in February was 2.4 inches, about 30 percent below normal, the Agriculture Ministry estimates. It is Europe’s third-largest barley producer and sixth-biggest grower of corn and wheat, according to Eurostat, the EU’s statistics office. Spain’s soft- wheat harvest will plunge 23 percent this year as durum-wheat output falls 20 percent, the ministry said April 17. Durum is used to make pasta.

Drought damage is extending beyond Europe, with parched fields across South America driving oilseed prices higher. Soybeans traded in Chicago rose 18 percent this year, rapeseed futures gained 11 percent in Paris and palm oil advanced 9.5 percent in Kuala Lumpur. Oil World, the Hamburg-based oilseed research company, has cut its estimate for South America’s soybean crop at least seven times since December.

Mexico’s Drought

The worst drought in seven decades in Mexico has caused more than 16 billion pesos ($1.2 billion) in agricultural losses, led by $710 million for corn, the U.S. Department of Agriculture’s Foreign Agricultural Service said in a March 30 report. Its corn production for the 2011-12 season that started in October will drop 11 percent, it said.

France had an average of 28 percent less rain than normal since the start of September, the Agriculture Ministry said April 4. About 89 percent of the country’s water table was below-normal on April 1, data from government water information service Eaufrance shows. Soil moisture levels were at record lows this month from the Pays de la Loire in the west to Alsace in the northeast, a report from Meteo France showed.

German Freeze

About 660,000 hectares of winter crops, mostly wheat and barley, were damaged in Germany by freezing temperatures in February, Deutscher Bauernverband reported April 17. Some farmers are tearing up and replanting as much as 70 percent of their fields, and there is concern that dry growing conditions may cause further damage, the Berlin-based lobby group said.

The country’s winter soft-wheat harvest will probably be 6.8 percent smaller than last year because of the frost damage, farm organization Deutscher Raiffeisenverband e.V. said April 18. Germany is Europe’s second-biggest wheat producer.

“I don’t think you need to worry too much about the U.K. just yet, but southwest Europe is bad,” Celine Sicard, an analyst at Union InVivo, said by phone April 16. “The further south you go, the worse it gets.”

To contact the reporters on this story: Whitney McFerron in London at wmcferron1@bloomberg.net; Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.


American Apparel's Future
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus