Bad harvest

Germany's cereal crop is expected to come up short this year after enduring months of heat and dryness during the spring and early summer months and being inundated later by rain in the northeastern part of the country.

The German farmers' association DBV estimates some 39 million tons of cereals - wheat, barley, rye, triticale, oats and corn - will be harvested this year. That's down nearly 12 percent from 44 million tons in 2010.

Wheat is particularly affected, and the overall ceral output is down in the northeastern states of Mecklenburg-Western Pomerania and Schleswig-Holstein. In addition to cereals, rapeseed output is expected to drop 34 percent from about 5.7 million tons in 2010 to an estimated 3.7 million tons this year.

DBV spokesman Johannes Funke said this year's harvest has so far been a "serious disappointment" for farmers.

"We need to wait and see how the rest of the European harvest goes," he told Deutsche Welle. "Other countries could harvest more and even things out. But the problem is that farmers here will be losing money."

Although cereals are fetching good market prices at the moment, that doesn't help farmers who have little to sell, Funke said. "Farmers can only earn money if they have something to sell."

He added that changing weather conditions have made the cereal harvest increasingly difficult.

"We want plant breeders and politicians to step up their efforts and deliver plants that flourish in this changing climate," he said. "Plants need to be able to endure the spring dryness better."

Food prices affected

With a smaller supply of cereals on the market, consumers are likely to be confronted with price hikes, particularly for meat and poultry.

Werner Hilse, president of the farmer's association of Lower Saxony, told German public broadcaster NDR that between 70 and 80 percent of meat production costs can be attributed to feed derived from cereals.

"We're faced with a very difficult situation when it comes to hogs," he said.

On the other hand, bread is less likely to be affected as factors other than commodities weigh more heavily on its price.

Amin Werner of the German Bakers' Confederation said energy and personnel costs account for the bulk of expenditures for bakers .

"Of course, it's always a concern when a harvest is less successful than in the previous year," he told Deutsche Welle. "I think there will be a moderate adjustment in prices, but mainly because of energy and personnel costs."

Speculation following volatility

Commodities speculators have been following "the erratic nature" of the supply and demand for grains in recent years, according to Jack Watts, an analyst with British agricultural research group HGCA.

But for the most part, he added, the markets have already absorbed the news of this year's weak harvest in Germany.

"Speculators are largely focusing on the United States and looking at the prospects of the US maize crop," he told Deutsche Welle. "What's driving the grain market at the moment is that the world is going to have a very tight supply of maize, principally because of the difficult weather conditions in the US in the spring and summer."

Author: Gerhard Schneibel
Editor: John Blau