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Drought boosts food price inflation
Author: Julian Bell, Senior Consultant, Rural Business Unit, SAC
After a dry early spring Scotland has seen the rain return with a vengeance in many areas. The same cannot be said for the south of England and parts of the Continent which have suffered from the driest spring for a century or more.
Although rain is now falling in the worst affected areas, it is too late for many crops. The extent of the damage is not yet clear. In England the NFU are forecasting that wheat yields will fall by 15% which would result in the lowest cereal crop in 30 years. Across northern Europe grain production estimates have also been cut with malting barley particularly badly affected.
For vegetables and potato crops the situation is potentially serious especially if widespread restrictions on irrigation are applied in the south and east of England.
What will this mean for food prices? The drought has undoubtedly contributed to rising food prices with a smaller EU grain crop now inevitable. However, time remains for many crops in the UK and overseas to recover. Grain markets have fallen sharply in recent weeks as better growing conditions become apparent. This should help ease food price inflation if it continues. This price fluctuation helps demonstrates how little protection the EU consumers now has from global markets swings, the ultimate conclusion of decades of agricultural market reform. Whether the EU will ever have the stomach or budget to actually do anything about this is doubtful - a return to the days of intervention buying seems unlikely in these straitened times.