Europe's Drought Reaches the P&L: Apetit Cuts Guidance, Germany Warns on Feed, UK Grain Heads for a 1984 Low

A Finnish food group cut its profit outlook this week because it did not rain in Sweden. Apetit now expects a full-year trading loss of up to €2m, against a €5.9m profit last year. The peas did not grow, so whole fields were left in the ground.

This is the second cut of the year. Apetit warned in April that 2026 would land well below 2025. It warned on the harvest in December before that. The group posted a €1.4m trading loss in the first quarter on sales of €46.1m. Its half-year report is due on 21 August.

One mid-sized firm missing a number is a small story. Three warnings in nine days is a cost curve.

Berlin says the feed has already run short

On 12 August, Germany's farm minister Alois Rainer set out an interim view of the drought. His line was blunt: "Persistent drought is already leading to significant bottlenecks in the feed supply."

He went further. If grass and fodder yields drop, farms buy feed at high prices. Some will cut herd numbers to cope. Berlin is readying relief money and cover for farms. The full harvest report lands at the end of August.

Herd size is the number to watch, because it sets milk supply two years out. A farm that sells cows this autumn does not put that milk back next spring.

The UK is on track for its worst grain harvest since 1984

The Energy and Climate Intelligence Unit works from AHDB estimates. It puts the UK grain and oilseed harvest at 19.5 million tonnes. That would be the worst since detailed records began in 1984. It sits about 2.5 million tonnes below what the USDA and Coceral had forecast.

UK arable farms stand to lose between £293m and £390m in sales at today's prices. Wheat is running at 6.8 tonnes a hectare, under the ten-year mark. More than half the wheat is already in.

The weather behind it was extreme. England and Wales had their driest July on record. England got 6.5mm of rain, a tenth of the long-run norm. Southern England had its driest month in a run of data that starts in 1836. This is the third poor UK harvest in a row.

Spot milk and the dairy glut now point different ways

AHDB counts 18.5 million litres of GB milk lost across three heatwaves. The UK passed 35°C in May, June and July for the first time. The second wave peaked at 37.7°C. By early July, the seven-day rolling figure sat 2.9% below the five-year mark.

Spot milk has risen by about 10 pence a litre. It now trades at 38 to 48 pence. The Defra farmgate price in May was 34.2 pence.

Most 2027 dairy plans were built the other way round. Milk powder prices crashed this year and the trade has spent months talking about a fat and skim glut. Both things can hold at once. Powder is a stock you can sit on. Fresh milk is not, and a cow that was too hot to eat gives less of it.

The risk is not spread evenly. Arla, DMK, Müller, FrieslandCampina and Lactalis all buy fresh milk from northern Europe. Those are the farms now short of grass. Bakery groups buying UK and German wheat face the other half of it. Frozen veg packers sit closest to the fire. A pea that was never picked cannot be bought back at any price.

What this means for operators and investors

A drought does not land as one big line in the accounts. It arrives as a dozen small ones. Lower yields, fields left standing, higher feed bills and thinner milk. Then more spot buying, and a plant that runs short weeks because the crop never came.

A hedge covers the price of grain. It does not cover the grain that was never grown. That gap is where this year's profit warnings are coming from. It is a sourcing problem, and it belongs with the buying team.

For buyers of assets, a weather warning is a screen. A firm that cuts guidance twice in one year on the same crop has a sourcing problem. Price it into the bid. The firms that hold their margin this year wrote weather into the contract before the weather arrived.