Ministers, farmers, supermarkets and utility companies will meet this week to assess a worsening dry spell in much of southern and eastern England that is threatening to become an agricultural and environmental disaster.

Britain's second-driest spring in 100 years and the warmest since 1659 has left soil in parts of East Anglia and south-east England concrete-hard, with many rivers shrunk to trickles and crops withering at critical times in their growth.

Some eastern counties have had only 5mm of rain since the end of February, with most regions seeing no more than 60% of average rainfall in the past four months, usually one of the wettest times of the year.

"The next few weeks are critical," said National Farmers Union water adviser Jenny Bashford. "We had some rain last week but all it did was stop the situation worsening in some places. If we get a heatwave now, and the forecast is for above average temperatures and only sporadic showers in June, we are in a different situation. The north and north-west is largely OK but there are already significant problems in the south and east."

The meeting is at the request of the environment secretary, Caroline Spelman, who asked the Environment Agency two weeks ago to report on how a drought might affect food production and prices, water and power supplies.

Water companies, which have been upbeat so far about supplies, are likely to warn that some reservoirs in the south and east are beginning to empty but that no hosepipe bans will be needed for several months. Food prices will rise.

Farming leaders warned Spelman last week that production across much of southern Britain was likely to be down by 15% if normal rains resumed immediately and by much more if prolonged rains did not come soon. An increasing number of farmers predict that yields will be be reduced by 50% or more, warning that the impact of a continuing dry summer could last well beyond the harvest into next year.

The government's Centre for Hydrology and Ecology reported soils in many areas were at their driest for 50 years. "The exceptional aridity of the early spring, following a relatively dry 2010, has resulted in agricultural and hydrological drought conditions affecting large parts of southern Britain," it said.

George Dunn, a farmer near Winchester, Hampshire, said: "It's too late now for many crops. Some farmers have destroyed their spring barley crop and replanted. We can expect the wheat harvest to be 10%-20% down and the barley to be 30% down. It will get very serious soon for livestock farmers. We're starting to see farmers sell their cattle because they don't have grass to feed them. The number of animals going to abattoirs is increasing. Wheat is going up but most farmers have already sold a lot of their harvest in advance for a low price."

Fruit growers and farmers who have invested in their own reservoirs are benefiting from high prices and an early harvest, but many vegetable growers have resorted to measures usually seen only in midsummer droughts. In Cambridgeshire, farmers have started to spray crops only at night and not in windy weather.

Food prices are expected to rise and a further prolonged spell of dry weather or a heatwave could result in restrictions on water use by the public, including hosepipe and sprinkler bans. The government could declare a drought within weeks. "At this point a whole range of powers could be invoked, from allowing farmers to take more water from rivers, to water restrictions on consumers," said Trevor Bishop, head of water resources at the Environment Agency.

He admitted ecological damage had already been done. "We are seeing a significant impact on rivers like the Tone in Somerset and Frome in Dorset which are at their lowest levels in 50 years. We are having to rescue fish and have started pumping [underground] water into rivers to increase the flows," he said.

Concern is growing across Europe that the drought will be disastrous for economies, affecting tourism, electricity supplies and food prices. And last week brought more bad news for the agricultuaral sectors of countries such as Spain and Holland as the E.coli outbreak saw shipments of fruit and vegetables hit hard. The Dutch industry association Productschap Tuinbouw said it estimated the cost of the infection scare to farmers at 50m euros per week.

Meanwhile, with the promise of loans for French farmers, European wheat stocks are expected to hit a 30-year high, after prices rose 36% in the past two months. The spike – caused by pressure on supplies after three consecutive years of low wheat yields – will raise fears that Europe will have to lift import restrictions on GM foods. Last year, a massive drought ruined a third of Russia's crops.