Tuesday, March 20, 2012

Are Higher Food Prices Coming?

Consider the following recent stories

From Agrimoney.com
Concerns over drought in western Europe and North Africa shifted up a gear as Spain's was seen as already damaged, with farms in major UK cereals areas warned of "significant risk", and Morocco seen facing "significant" harvest losses.

"Fears are growing that Europe could face a major drought as water reserves are very low in western Europe," including France, Portugal and Spain, besides Morocco, Agritel, the Paris-based consultancy said.

The comments came as US Department of Agriculture attaches in Madrid warned that Spanish winter grains were "at a very critical situation" after "the driest winter ever recorded", which had seen some areas without rain since the first week of November.

Surface soil moisture in most of Spain's growing regions is below 5mm, when less than 10mm "will not support seed germination or early growth potential", according to the attaches
From Agrimoney.com
Strategie Grains heightened concerns over the danger to European crops from "worrisome" weather even as it downgraded estimates for the region's grains harvest to account for the last threat – cold.

The influential analysis group warned that "with a severe drought already affecting Spain and Portugal and other countries in west Europe facing drought warnings, the weather outlook is worrisome".

"Yield potentials could be very negatively impacted if rains do not materialise soon," with prospects worsened in many areas by the "fragile" condition of plants "as the winterkill was greater than normal and as groundwater reserves have suffered from the 2011 drought".

The alert extended a series of cautions over the risk to crops posed by a dry spell which has seen parts of Spain go without rain since November, and the UK's important cereals growing region of East Anglia suffer its driest winter on record.

Odd weather patterns set-off the price spikes two years ago.  It started in Russia, which eventually banned exports, which led to hoarding on the part of other players.  Since then, high commodity prices have brought new capacity into the market.  But, we're still dealing with a strange weather situation overall.