The unprecedented dry weather conditions seen in the UK over the past few months have been replicated across other northern European countries, pushing up grain prices and greatly increasing the likelihood of further food price rises later in the year. Ben Cooper reports.
Only the capricious British weather could, in the midst of one of the most prolonged and worrying spring droughts seen in recent times, contrive to have the first day of the opening cricket Test match all but ruined… by rain.
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Cricket does require frustratingly high standards of dryness and sunlight, baffling really since the game was invented in a country rarely blessed with either. But even though the match was taking place in Wales, which owing to the UK’s prevailing rainfall patterns has suffered less acutely from the drought and where rain is never greeted with great surprise, the rain yesterday was the exception rather than the rule.
The drought has of course had far more serious implications for farmers and food producers, with the chances of it leading to a further spike in retail food prices, already around 4% up on last year according to the Office for National Statistics (ONS), now seemingly odds on.
According to the Department for Environment, Food and Rural Affairs (Defra), the UK has had only 61% of its normal rainfall over the past three months and as little as 24% of its long-term average rainfall in April.
East Anglia and the Midlands have provisionally had the driest October to April since 1975/76. Soil moisture at the beginning of April was at levels more usual for the start of June, Defra states.
While there may be impacts on domestic water supplies and wildlife, it is the effect on agriculture, notably on cereals crops grown predominantly in the east of the country, which is most worrying. Wheat yields are reported to be as much as 25% down in some areas. Allan Wilkinson, head of agriculture for HSBC Bank, recently forecast that the drought may reduce UK grain and oilseed yields by 20%.
Not only quantity but quality is likely to suffer, with some wheat originally destined for food production only good enough for feed. Farmers also report that cole crops, such as cabbages, broccoli and cauliflower, are being affected by the dry weather, having already suffered as a result of severe frosts last year.
Most worrying for food manufacturers, however, is that the drought in the UK is only part of the problem. The whole of north-west Europe is suffering dry conditions.
“It is not just confined to the UK,” Jack Watts, senior analyst at the Agriculture and Horticulture Development Board (AHDB), tells just-food. “It’s a north-west European issue. France, Germany and Scandinavia are going through the same problems. What we’ve seen in Europe over the past three months is a very dry March, a very dry April and now a dry first half of May, and that’s really unprecedented.”
French wheat volumes are forecast to be down 11.5% year-on-year, with German output down 7.2%. Some analysts have predicted that France and Germany will see a 5% to 15% fall in crop volumes even if the weather changes soon. Deutsche Bank, meanwhile, has suggested this year could be on a par with the 2003 drought when wheat production across the EU fell by around 15%. France, Germany, the UK and Poland, which has also seen an unprecedentedly dry spring, account for almost 65% of total EU wheat production.
The perfect storm scenario is completed by high grain prices in the US and Canada, where there has been delayed planting owing to bad weather, while all this comes on the back of the shortfall in the harvest in Russia and Ukraine in 2010 that left stocks depleted.
Watts points out that, until relatively recently wheat prices for delivery in November had been at “a pretty significant discount” to prices for immediate delivery but now “forward prices have increased to be in line with the spot price, which shows concern is growing”.
With regard to food prices, the Food and Drink Federation (FDF), which represents UK food producers, believes that manufacturers buying exclusively in the UK are in a more difficult position, even though scarcity and high commodity prices are clearly far from restricted to the UK.
“The impact of this year’s weather conditions may create some short-term supply issues for some UK manufacturers who rely solely on British commodities,” says FDF director of communications Terry Jones. “However, companies make consideration for such factors as reduced supply by careful buying and forward planning.”
Watts believes the multiplicity of adverse factors, some stretching back to last year, has reduced the supply chain’s capacity to absorb commodity price increases.
While Jones played down the threat of rising food prices, he concedes that high crop prices may eventually be passed on to consumers. “As with any strain on supply in global markets, there is a possibility that shortages may create some price rises. However, as food prices tend to move slowly consumers may not see the impact for some time. Manufacturers have been doing their best to mitigate the impact of ongoing global commodity price rises. However, there will come a time when it will be unsustainable for businesses to absorb all of these costs, so some of them may have to be passed on to the consumer.”
Some food companies have forecast that if there is no significant increase in rainfall in the coming month, price rises will begin to come through.
Notwithstanding some sporadic rainfall in certain areas in recent days, sustained wetter weather in the right places is what is required. Worryingly, meteorologists are predicting more of the same in the UK, not only for mid to late summer but critically for June.
Meteorological forecaster Netweather draws parallels with the scorching summer of 1976, and predicts the hottest months of a long, hot summer will be June and July. The Centre for Ecology and Hydrology has also recently warned that parts of southern Britain are suffering from their worst drought since 1976.
A seemingly unlikely change in the weather bringing copious rainfall would result in a few more cricket matches being scrubbed but is undoubtedly what the UK’s farmers and food producers desperately need.
