April 6, 2012

Europe's drought resowing could cost farmers EUR200 million

Europe's drought could cost farmers EUR200 million (US$261.67 million ) in resowing expenses, says farming lobby group Copa-Cogeca, with calls for lawmakers to introduce urgent measures to help the industry and maintain the bloc's production capacity.

"We urge the European Commission to introduce measures for farmers to help them get through this difficult period and to maintain the production capacity of the European Union, such as through advance payments and facilitating approval of state aid," said Ian Backhouse, chairman of Copa-Cogeca's cereals working party.

"Unfortunately, due to the lack of seeds available, farmers will not be in position to plant what the market needs. The exemption for farmers to use farm-saved seed in order to alleviate the lack of commercialised seed will help," he added.

The dry conditions in the growing areas of Spain, Italy, France and the UK, following severe cold weather in January and February, spell trouble for wheat growers in Europe. With the severe drought in southern Europe, it is likely that only 30% of the cereals area will be cultivated.

"The fundamentals of wheat appear to be increasingly bullish...as winterkill, and now dryness, issues in Europe have already taken a toll on the very young crop there," said Louise Gartner, analyst for Spectrum Commodities.

The current drought is slowing sales by producers, agricultural advisory service Offre & Demande Agricole said, while some farmers are prepared to irrigate their crops next week.

Meanwhile, Ukraine's production is already "a bust" with many acres normally allocated to wheat going to corn, Gartner added, while Russia has seen some winter-kill issues in their southern region..

Recent frosty mornings in Ukraine continue to increase losses of winter crops, which remain vulnerable following dry conditions upon planting and cold weather at the start of the year, agricultural advisory service Agritel said. It expects temperatures to rise from the middle of the week, which could boost crop development.

Weather forecasts could weigh on short-term sentiment for EU wheat futures, as much of the region's dry areas will see precipitation these two weeks, and temperatures are expected to stay above freezing, says commodities advisory firm INTL FCStone.