Grain prices are being pushed upwards as the worst European drought in decades forces countries to prepare emergency crop irrigation plans.
Forward prices for Irish wheat and barley rose by €8-10/t last week, following a major hike in European milling wheat futures.
New crop barley prices increased from €202-203/t dried to €210-213/t, with wheat prices €10/t higher.
While buyers in Ireland remained cautious, their European counterparts were much more active as drought fears took hold.
European milling wheat futures jumped to three-month highs on Wednesday as the worst drought for decades dashed hopes of a higher output in the world's largest grain-producing region for the 2011/12 season.
Market analysts are forecasting that the drought will have a devastating effect on yields given that the main areas affected -- Germany, France, Britain and Poland -- account for more than two thirds of EU wheat production.
Every passing day results in more concern about the effect of the dry spell on crop development.
Local authorities in France are imposing restrictions on the amount of water that can be extracted to irrigate crops and in Britain plans are being put in place to allow for limited crop irrigation should the situation deteriorate further.
French analysts Strategie Grains have downgraded French wheat production to under 35m tonnes, despite a 2pc increase in wheat area, while the Agritel forecast is for a 32m tonnes, which would equate to a 13pc drop in the average yield.
In Germany, crops in the northeastern region have been very badly affected by drought and wheat production there is estimated to fall by at least 8pc to under 41m tonnes.
A significant weather premium continues to develop in the grain market, according to market analysts. New crop feed wheat for November rose €8 last week, while milling wheat for November went up €16.25 and new crop French maize increased by €11/t.
Meanwhile, North American growers have the opposite problem, with wet weather on the plains of Minnesota and Dakota and into Canada delaying spring wheat sowings and having a knock-on effect on both yield and quality.
Taking all the factors into account, analysts believe wheat production for the 2011/12 season will not be enough to replenish diminishing milling wheat stocks.
The dry weather is also expected to impact on European malting barley supply and futures prices have increased by €85/t as a result. While Irish malting barley prices is not calculated on futures prices, tighter supplies should translate into higher prices at harvest.