PARIS, France (Reuters) – European Union harvest estimates are shrinking by the day as analysts cut crop forecasts and plants wilt in a months-long drought that looks set to continue for a while.
The dry conditions helped lift wheat and canola futures last week.
Several months of drier-than-usual weather have parched farmland and cut water reserves in key grain producers France and Germany, stoking worries of a drought similar to that experienced in 1976 and fuelling concern for the final harvests.
“As time goes by, the impact on crops grows stronger. We need water, period,” a European trader said.
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Parts of central Europe had less than 40 percent of their long-term average rainfall from February to April and drought in much of Europe looks set to continue with little relief until June at the earliest, forecasters say.
The drought in Germany will cut rapeseed production by 23 percent to 4.44 million tonnes, while the country’s barley harvest will slump 15 percent to 8.9 million tonnes, German analyst Deutscher Raiffeisenverband e. V said last week.
Oil World put the German rapeseed crop at 4.6 to 4.8 million tonnes two weeks ago.
French analyst Ariel last week forecast that France’s soft wheat output could fall to 31.7 million tonnes, down 11.5 percent from last year.
Other analysts estimate France’s soft wheat harvest at 33 to 34 million tonnes, with some forecasts as low as 31.5 million tonnes. In 2007, the crop was at 30.6 million tonnes.
Agritel said France’s average soft wheat crop yield could dip 13 percent to 2.55 tonnes per acre, compared to 2.93 tonnes last year. This would not be compensated by a two percent increase in area planted at slightly more than 12 million acres.
This average yield would be slightly lower than in 2003 and 2007, the last droughts that damaged crops in France.
In Germany, the Farm Co-operatives Association’s latest estimate is 22.31 million tonnes, down 3.2 million tonnes from last month and down 7.2 percent from last year.
Germany is the EU’s second largest wheat producer after France.
Analyst Strategie Grain’s forecast for France was more conservative at 35 million tonnes, but it was revised down from 36 million the previous week and the analyst said it could cut it further if the drought continued.
“This figure could be revised down due to the high temperatures expected for the weekend and further dry weather,” it said, stressing that the 2011 spring was atypical and made forecasts more difficult.
The threat to Europe’s wheat crop revives memories of last year’s drought in the Black Sea region, which ravaged local crops and prompted Russia to block exports and Ukraine to impose export quotas.
That sent world prices rocketing, fuelling protests in the Arab world earlier this year and raising concern about food riots of the kind that hit countries in 2008.
France benefited from the Black Sea countries’ withdrawal from the export market in 2010-11 and accounted for 10 percent of wheat trade.
However, Agritel said the situation may be reversed in the coming season.
It pegged France’s export potential at six million tonnes in 2011-12, or half the 2010-11 season.
“This drop in French supplies could nevertheless be compensated by the likely return of Russia and Ukraine on the export market,” it said.
Russia’s weather service said there is almost no chance of a repeat of severe drought like last year. However, some forecasters see a dry weather trend for the next few weeks that could limit production.
