Opinion

Consecutive Years of Drought Threaten Food Security in the EU

Rice
Fruits
Ireland
Switzerland
Published Apr 18, 2023
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Europe is set to enter a consecutive year of drought due to low rainfall in France, Ireland, Switzerland, Italy, Spain, and Germany. As the summer of 2023 approaches, severe water shortages could threaten the continent's food supply. Italy and Spain have been heavily affected by the drought, and this has impacted rice, olive oil, and citrus production in the bloc. The global supply of olive oil is forecast to fall by 38.8% to about 2 million mt this year, from 3.3 million mt in the 2021/22 season, due to production deficits in Spain, Italy, and Portugal. Citrus production in Spain is also expected to suffer, with the latest production estimate for the 2022/23 season at 5.8 million tons, 17.7% less than in 2021/22, and the smallest crop in the past ten years. Tridge expects countries affected by the drought to continue developing strategies to remedy the water shortage.



Europe is set to enter a consecutive year of drought due to low rainfall in France, Ireland, Switzerland, Italy, Spain, and Germany. According to the Helmholtz Centre for Environmental Research, this would be the fifth year of drought in the past six years. The record-high temperatures experienced during the summer of 2022, followed by a dry winter period, led to many aquifers and surface reservoirs drying up. As the summer of 2023 approaches, severe water shortages could threaten the continent's food supply. Italy and Spain have been heavily affected by the drought, and this has impacted rice, olive oil, and citrus production in the bloc.

According to the European Commission's Joint Research Centre, Italy produces 50% of the EU's rice output, and in Lombardy and Piedmont, major rice-growing regions in Italy, soil moisture levels have failed to recover from the drought of 2022 and snowfall accumulation in the Italian Alps is below that of the previous year. As a result, rice production is set to fall in Italy, with the area sown dropping to 211K hectares, 7,400 hectares lower than last year, and 16K hectares less than in 2021. This would be the smallest area for rice production in the country in 23 years.

The global supply of olive oil is forecast to fall by 38.8% to about 2 million mt this year, from 3.3 million mt in the 2021/22 season, due to production deficits in Spain, Italy, and Portugal. Spain alone provides 40% of the world's olive oil, and according to the European Commission, Spain's olive oil production is set to fall by almost 50% due to heat waves during the flowering stage of the olives. Production in Italy and Portugal, the second and fourth leading olive oil producers, contributing 20% and 9.6% of the world’s olive oil, respectively, is also expected to suffer due to the drought. Despite Greece not being affected by the drought, the country's olive oil quantities will not be adequate to make up for the deficits in Spain, Italy, and Portugal.

Citrus production in Spain is also expected to suffer, with the latest production estimate for the 2022/23 season at 5.8 million tons, 17.7% less than in 2021/22, and the smallest crop in the past ten years. Spain is one of the leading global suppliers of citrus, and following the citrus production woes in the US, South Africa, Brazil, global production is set to drop significantly. As a result, global orange production is estimated to drop to 47.5 million mt in 2022/23, a 5% decrease compared to the 2021/22 campaign, with the EU estimate at 10.5 million mt, 13% lower than the previous campaign.


Source: Tridge, USDA

These production concerns have led to elevated prices of products olive oil, oranges and rice. According to Asoliva, the Spanish exporters association, wholesale prices of virgin olive oil in Spain rose to USD 7.51/litre compared to USD 5.48/litre the previous year, a 37% increase, and export prices rose by 60.4% YoY to USD 5.63/kg (EXW) in Mar-23. These price levels have affected demand, which is 15-20% less than in 2022. According to Tridge data, Spanish orange export prices also rose to USD 0.95/kg in Mar-23 from USD 0.74/kg in Mar-22, a 30% increase. In Italy, export prices of all varieties of rice have gone up in April. For example, in Bologna, the price of Arborio rice is EUR 2125/ton, 43.58% more than the previous year, while Baldo rice is going for EUR 1795/ton compared to EUR 1297.50/ton in 2022, a 38.34% increase.

The citrus production woes in Spain could also open the door for global competitors such as Egypt, allowing them to capitalise and increase their market share in the EU. As a result, in 2023, a rise in orange production in Egypt is expected to push the country's exports to 1.7 million mt, a 30.77% YoY increase and the highest on record. A dip in rice production in Italy could also lead to the country’s leading markets, France, Germany, and the UK turning to alternate suppliers such as Cambodia, Pakistan, Thailand, and India. Cambodia, in particular, looks to implement strategies to boost the country’s rice exports in 2023, with the EU seen as a key destination.

Tridge expects countries affected by the drought to continue developing strategies to remedy the water shortage. For example, in Catalonia, Spain, the government has ordered farmers to reduce their water consumption by 40%, and in Switzerland, efforts have been made to cover glaciers and mountain snow with giant sheets reflecting the sun. In Italy, Legambiente, an environmental association, and the government are discussing the implementation of the reuse of purified waste water in crop production along with formulating more effective irrigation strategies.

Olive oil prices are expected to remain elevated for the coming month as the major producers, Spain, Italy, and Portugal, are all expected to suffer production setbacks due to the drought. In Italy, rice is expected to trade upward with sowing set to commence this month amid limited water supply. Italy’s rice imports have also risen by 86% YoY, as the country turns to Pakistan, Myanmar and Vietnam for rice production.


Follow the links below for related stories:

1. High Price of Extra Virgin Olive Oil in Spain Due to Global Shortage

2. 50% Less Olive Oil Production Expected in Spain Due to Drought

3. Global citrus fruit trends focus on oranges: January to March 2023

4. Spain: They estimate a drop in citrus production of 17.7%

5. Citrus production in Spain falls by 25% due to the drought

6. Spanish Orange Prices Increased 30% YoY in W10, Despite Low Demand

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