The European Union's agriculture industry risks being destabilized by severe drought in some of the world's major producing regions, the bloc's executive arm said Thursday, with a strong farming subsidies scheme and ambitious policies in developing countries needed to increase global food security.

"Over the past [few] weeks, the drought in several regions of the world has led to dramatic price increases for certain commodities--mainly corn and soybeans--which risks destabilizing certain sectors of the European agriculture [industry]," said Dacian Ciolos, European commissioner for agriculture and rural development.

Agricultural commodity prices were likely to remain at high levels and relatively volatile, the European Commission said, after drought in the U.S. and Russia tightened world supplies, causing corn to trade close to record highs during August, tracked by wheat.

Such market conditions "demonstrated, once again, the need for a strong Common Agricultural Policy," Mr. Ciolos said, adding it is "crucial to help other parts of the world, especially developing countries, to have their own and ambitious agricultural policies in order to increase global food security."

The European Commission cut its forecast for EU cereal production Thursday, by 0.8 million metric tons to 278.6 million tons, and said that level was "only" 2.2% lower than the five-year average despite drought in some member states.

It also downwardly revised its corn output forecast, by 1.5 million tons to 60.2 million tons, but increased its soft wheat production forecast, by 0.8 million tons to 127.3 million tons.

Mr. Ciolos said it is crucial to maintain the EU's agricultural potential in a sustainable way, due to climate change and increasing food demand.

Write to Michael Haddon at michael.haddon@dowjones.com
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August 31, 2012 07:17 ET (11:17 GMT)
DJ EU Says Global Droughts May Destabilize Blocs Agriculture Industry->copyright