European drought bites hard

Key parts of Austria's grain production zone (pictured) has been impacted by hot and dry conditions throughout the European summer.
Key parts of Austria's grain production zone (pictured) has been impacted by hot and dry conditions throughout the European summer.

AUSTRALIA is not the only continent suffering through drought at present.

European grain trade organisation Coceral last week put out its September estimates, forecasting a European Union (EU) wheat crop below 130 million tonnes of wheat, well below the averages of the past five years.

In particular, northern European states such as the UK, Germany, Denmark and Sweden will have markedly lower production this year compared with 2017.

Production is down in the US but there are good inventories. Russia will be down 10m tonnes from last year (42m tonnes) and given the EU is also light on for wheat it will most likely be the US that fills the export void.

Tobin Gorey

There has been significant media surrounding the hot English summer, which has been the warmest since record keeping began.

Coceral slashed nearly 9m tonnes from its June estimate, highlighting how sudden the decline in crop condition was.

Only Spain experienced a significant year on year increase in production, due to issues with floods in 2017.

Commonwealth Bank of Australia commodity analyst Tobin Gorey said the drought meant Europe would not be a major player in wheat exports this year.

He said with some doubt over the Russian crop it left the US as very much the focus of wheat importers.

“Production is down in the US but there are good inventories,” Mr Gorey said.

He said he expected US Department of Agriculture estimates predicting Russia would export 35 million tonnes of wheat this year would not come to pass.

“Russia will be down 10m tonnes from last year (42m tonnes) and given the EU is also light on for wheat it will most likely be the US that fills the export void.”

The EU is importing far more wheat this season according to EU data, which showed imports landing in the Netherlands, Greece and Slovenia.

European crushers are also bringing in soybeans, which are up 11 per cent year on year.

It’s a similar situation for barley, which only mustered exports of 25,341 mt in the week to September 16, although overall sales are 8pc higher than at the same stage last year.