Northern Italy’s worst drought in 70 years could limit supplies of tomatoes, olive oil and risotto rice, according to importers, with Walter Zanre, chief executive of Filippo Berio UK, warning: “If it doesn’t rain very soon, the olive harvest will fall dramatically”.
The potential shortage would be another major blow to world cooking oil markets, where prices have risen this year and supply has tightened, forcing rationing in UK supermarkets in recent months.
Jason Bull, director of Yorkshire-based Eurostar Commodities, which sources rice from Italy, spoke of a “very real fear” among rice farmers that some of this year’s crop “will rot in the ground because there isn’t enough water to irrigate “.
There is talk of “up to 60% less rice in Italy,” Bull said. Concerns about a drastically lower than usual harvest has led to increased demand in Europe for rice from Asia, which is producing in much faster quantities than Europe but is associated with higher transport costs due to the distance. Demand for rice has also increased in Asian producer markets as prices for other grains such as wheat have soared following Russia’s invasion of Ukraine in late February.
Bull’s warning came ahead of the United Nations’ Food and Agriculture Organization (FAO), which said on Friday that world rice prices rose for the sixth straight month in June, bringing its global reference price index close to levels observed during the trade Demand disruptions caused by the 2020 pandemic lockdowns.
Zanre said “lower yields” of tomatoes, apricots, peaches and pears were likely after the drought, although the effects of drier weather, he suggested, could also lead to better quality Italian wine if dry weather meant more sugar concentrated in grapes that would also be less productive.
The Italian government last week declared a state of emergency in five northern regions after weeks of hot and dry weather dried up sections of the Po, the country’s longest river, which irrigates farms in the north of the peninsula but flows around two meters lower, which is usual for the Season.
The Po drains an area that grows around a third of Italy’s crop, the National Association of Direct Farmers – or Coldiretti as it’s better known in Italy – said in a statement, warning of potential losses for farmers affected by the drought could arise to €3 billion
Unlike southern Italy, where farms and irrigation systems are designed for hot and dry weather, the north of the country is not usually used to drought. The bigger concern is typically spring flash floods as the Po is fed by a mix of seasonal rain and melting alpine snow.
However, this year’s rainfall at the beginning of the year, which was less than usual, has in turn led to rationing of drinking water in Verona. Bull warned that the need to prioritize drinking water during the prolonged drought would limit irrigation supplies.
Italian farmers, like their peers in the UK and elsewhere, have been grappling for months with rising input costs from transport to fertilizer, made worse by the drought – as farmers pay quotas for increasingly expensive fuel or electricity to run irrigation systems must not normally have to be used.
Drought has also hit parts of Portugal after the country’s meteorological office said it was the hottest May since 1931, while parts of Greece have already seen a repeat of last summer’s wildfires on a smaller scale. France’s wheat harvest had earlier been forecast to decline this year due to dry conditions, possibly contributing to much larger deficits caused by the invasion of Ukraine, a major grain producer, by Russia, itself the world’s largest wheat exporter.
The invasion, in turn, disrupted global supplies of sunflower oil, much of which comes from Ukraine, and prompted the Indonesian government in April to temporarily limit palm oil exports – a move to ensure there is enough cooking oil for nearly 300 million residents, but affected more than half of the world’s palm oil supply.
Since then, global cooking oil commodity prices have fallen slightly, with the FAO’s June index showing a 7.6% month-on-month fall. Still, the index was up around 34% in June 2021 and over 110% compared to 2020.
“World palm oil prices fell due to seasonally increasing production from key producing countries and the prospect of increasing supplies from Indonesia,” the FAO said, while sunflower and soybean fell “due to muted global import demand resulting from rising costs.”