Europe Wheat Harvest to Fall on Drought, May Be Catastrophic, Agritel Says

The European Union wheat harvest, which accounts for a fifth of world production, will fall this year as drought cuts yields in France and Poland, said Michel Portier, general director of Paris-based farm adviser Agritel.

“We’re losing yield,” Portier, whose company advises more than 2,000 farmers on crop sales, said in an interview in Paris today at a conference on commodity-industry regulation. “We already know that the 2011 harvest will be below 2010, both in France and in Europe.”

The wheat situation in Europe “will be catastrophic” if the drought continues for another 10 days, and no significant rain is forecast for northern Europe for the period, Portier said. For now the outlook for Black Sea region production is “alright,” which is keeping wheat prices in check, he said.

France, the EU’s largest wheat grower, just had its second- hottest April since 1900 and one of the driest since 1953, the country’s Agriculture Ministry reported this week. European wheat and rapeseed are at an “important tipping point” because stored soil moisture from the winter has been used up, Martell Crop Projections said in a May 2 report.

The EU wheat harvest fell 2.4 percent last year to 135.4 million metric tons, the London-based International Grains Council estimates, on a world wheat crop of 649.6 million tons. The council last month cut its outlook for world production in 2011/12 by 1 million tons to 672 million tons as dry weather in the U.S. and the EU affects crops.

Yield Losses

“I’m very concerned,” Portier said. “The situation is irreversible. It’s not in all the forecasts yet. The biggest yield losses will be in France and Poland, Germany is more mixed, the south is good and the north is bad.”

Milling wheat for November delivery, after the next harvest, has dropped 5.5 percent on NYSE Liffe in Paris this year and is up 37 percent in the past 12 months.

Temperatures across France averaged 14.5 degrees Celsius (58 Fahrenheit) in April, 3.8 degrees above normal, while average rainfall was 21 millimeters, 65 percent less than normal, according to the ministry’s weather report.

Accumulated rainfall since the start of March is below normal, “particularly” north of the line from Bordeaux to Nancy, the ministry said. That part of the country accounts for more than 80 percent of France’s wheat crop.

“I’m not sure it’s priced in,” Portier said. “If we have no more water for two more weeks, prices will go higher.”

(Source: http://www.bloomberg.com/news/2011-05-06/europe-wheat-harvest-to-fall-on-drought-may-be-catastrophic-agritel-says.html)