As drought hits Germany's harvest, will food prices rise?

Germany's farmers are bracing for a below-average harvest due to a severe drought affecting farmland, with the German Farmers' Association (DBV) predicting a 7% decrease in the grain harvest compared to last year. The heat wave in June, coupled with overly dry spring conditions, has significantly damaged many crops, with rapeseed production expected to drop by 17% and barley production remaining steady.

The potato and sugar beet crops are also anticipated to be below average, particularly in southern and western Germany. While Germany has a 2 million-ton grain surplus from last year's harvest, which may prevent immediate price hikes, the sharp decline in rapeseed and sugar beet production could strain domestic oil and sugar supplies, potentially requiring imports.

The drought has also led to reduced animal feed stocks in several states, which could raise meat, milk, and egg prices. Germany's agriculture sector has been facing various pressures due to the COVID-19 pandemic, Russia's war in Ukraine, and the Iran war, leading to higher costs for fertilizer, energy, and pesticides. The government has acknowledged the challenges farmers are facing and has promised targeted assistance, including boosting EU fertilizer aid and reducing agricultural diesel tax.