French Corn Fried by Heat Wave Signals Plunging European Harvest

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Corn in parts of France, Europe’s biggest grower, is about half as tall as it should be and in the worst condition that Luc Esprit has seen since 2003.

“The corn is simply fried,” said Esprit, the director general of Maiz’Europ’, a Montardon-based trade organization. He spent the past three weeks surveying damage from drought and a record heat wave stunting crops across Europe. “It’s not a desert, but the soils are cracked,” he said. “There are major water shortages. Where there’s non-irrigated corn, there are major pollination problems, with plants that have no ears.”

After the biggest European corn harvest ever last year, production in 2015 is poised to plunge. Output in the 28 nations of the European Union will fall 19 percent to 62.8 million metric tons, based on the median of eight analyst and trader estimates in a Bloomberg survey. The drop will be the biggest in EU production data going back to 2001.

While record global inventories left over from 2014 have kept prices in check for now, reduced domestic supply would require more imported feed grain for dairy farms and pork producers in Europe, the world’s biggest corn user behind the U.S. and China. EU purchases from outside the region will be the third-highest ever, the U.S. Department of Agriculture estimates.

Hot, Dry

Rainfall in Spain, central France and northern Italy was less than 20 percent of normal in the 30 days through July 29, WorldAgWeather data show. Over that same period, temperatures were 4 degrees to 6 degrees Celsius (7.2-10.8 degrees Fahrenheit) higher than usual. Spain and Italy had their hottest July ever. The first three weeks of last month were the warmest on record in eastern France, where Esprit says some farmers will see output drop as much as 50 percent.

The blistering heat couldn’t come at a worse time for developing corn plants, which were in the flowering stage and at their most vulnerable last month. Most farmers will start harvesting in September.

In France, where corn might typically reach 3 meters (9.8 feet), many plants are still less than 1.5 meters, according to Esprit, who has been in the corn business for 18 years.

Conditions Worsening

About 59 percent of the crop in France was in good or very good condition as of July 27, down from 85 percent in the middle of June, according to FranceAgriMer data. Declining prospects mean the country will produce 14.1 million tons this year, down 24 percent from 2014, the biggest drop since the drought and heat wave of 2003, according to the Bloomberg survey.

Esprit expects an even bigger decline, with French farmers collecting as little as 12 million tons, excluding corn for seeding. Europe’s harvest probably will be closer to 60 million tons than 65 million, he said.

“We’re headed for a big, big drop of corn production,” said Sebastien Poncelet, an analyst at Paris-based farm adviser Agritel. “The difference between a bad harvest and a disaster will be determined in August.”

Italian production will slump 23 percent to 7.1 million tons, and Romania’s decline will reach 19 percent to 9.8 million tons, the Bloomberg survey showed.

Big Surplus

Ample inventories may limit the impact of smaller crops on prices, which are up about 3.3 percent from a year ago on the Chicago Board of Trade.

Global stockpiles before the 2015 harvest will be at an all-time high of 194 million tons, following record crops in seven of the past eight years, USDA data show. Even with output expected to drop this season in the EU and the U.S., world reserves next year will still be the second-highest ever, the USDA said last month.

Since corn futures in Chicago touched a one-year high of $4.5425 a bushel on July 14 -- when too much rain soaked crops in the U.S. and threatened to damage them -- prices have tumbled 16 percent as conditions improved. Production in the U.S., the world’s largest grower and exporter, will be the third-highest ever at 343.7 million tons, the USDA predicts.

Chicago corn for December delivery rose 0.9 percent to $3.8225 a bushel on Wednesday. In Paris, corn for November rose 1.6 percent.

For now, the limited domestic supplies means EU corn buyers will need to import more, probably from neighboring Ukraine, the world’s fourth-largest shipper. Last month, the USDA boosted its estimate of EU imports, which will jump 65 percent to 14 million tons in the year ending Sept. 30, 2016.

Europe “will suck up imports,” Agritel’s Poncelet said.

Farmers in the EU will see yields shrink 17 percent this year to 6.71 tons per hectare, according to a July 27 report from the bloc’s Monitoring Agricultural Resources unit.

Costs may rise for livestock producers because the drought left French pasture growth at 14 percent of normal from June 20 to July 20, Agriculture Ministry data show. That means farmers may need to buy more feed grain.

“We’re running a bit short on feed grains, and that means we need to import,” said Stefan Vogel, head of agricultural commodity research at Rabobank International in London.