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EU grain production to rebound in MY 04/05
FAS-EU, May 21, 2004
With a lower expected price for new crop wheat in 04/05 and much greater domestic availability, feed use of wheat is expected to recover from the low level of 41.6 MMT in 03/04 in the EU-15 to 44.0 MMT in 04/05. In the NMS-10, a corresponding rise from 7.7 MMT to 8.1 MMT is expected.

In 03/04, despite the poor crop, European imports of wheat fell. This was due to high domestic prices encouraging a shift towards greater use of alternative feed sources. The very poor harvests in Russia and the Ukraine also cut off supplies of feed grains that had been imported into the EU in 02/03.

For example, in Germany, despite the smaller wheat crop in MY 03/04, imports also fell due to high domestic prices reducing demand for wheat. Based on the pace of imports to date in 03/04 imports are expected to decline by 400,000 MT.

Italy continues to be the world’s largest wheat importer. In MY 03/04 wheat imports rose following the poor domestic durum crop, with over 2 MMT durum imported (including 0.5 to 0.6 MMT of low quality Canadian durum from the 2002 crop). However, soft wheat imports declined marginally due to a slight fall in feed demand. Over 1.1 MMT of US wheat was imported into Italy in MY 03/04, with around 750,000 MT of traditional northern spring wheat, as well as several hundred thousand tons of SRW varieties.

In Spain, during MY 03/04, both imports and exports of wheat declined dramatically. Imports fell following the lack of availability of Black Sea feed wheat, which was partly replaced by wheat imports from Brazil (around 200,000 MT). Exports were reduced by the excellent crops in much of North Africa. Lower exports lead to increased domestic availability which was easily absorbed by increased feed demand. During much of the 03/04 marketing year, high and low quality wheat was priced at the same level in Spanish markets.

In the Netherlands, in MY 03/04, both domestic production and availability were good. During the course of the MY, the high price of wheat led to stocks being run down and some demand for feed wheat replaced with tapioca and feed peas.
Imports also declined with import prices being similarly high. In 04/05, wheat supply, imports and feed demand are expected to return to more typical levels.

For 03/04, 9.1 MMT of wheat and wheat products are expected to be exported outside of the EU-25, with a further 1 MMT to 1.2 MMT exports expected between April and the end of the MY in June, primarily from France to North Africa.

Prices for the new crop would appear to indicate that there may be some degree of price advantage for French exports on some nearby export markets, particularly if US autumn prices trend upwards.

In MY 04/05, Spanish exports are estimated to be at a stable level of 1.2 MMT, with the primary markets being in North Africa and the Americas, particularly for flour, semolina and pasta exports.

For Italy, in MY 04/05, the level of imports is expected to decline with a larger domestic crop.

In 04/05, an expected increase in German production will likely reduce imports by a further 400,000 MT. Exports would be expected to be higher, at around 6.5 MMT, though the German wheat may not be as competitive as French wheat, in which case some German wheat would likely be put into intervention. Therefore, estimated ending stocks are raised by 2.5 MMT for MY 04/05. This is partly due to the fact that from some regions of Germany, it is costly to ship grains to exporting ports, while there is nearby access to grain intervention centres.

In the UK, in MY 03/04 feed consumption of wheat declined due to a switch to feed barley on price grounds. This trend is set to reverse in 04/05. The UK is a stable market for high quality wheat imports. The division of exports between EU and extra EU destinations will depend on the quality of the 2004 wheat harvest.

Spanish 04/05 import estimates of 1.1 MMT are based on 900,000 MMT imports from the Black Sea region as well as 200,000 MT from the US and some limited Canadian imports. In 04/05, Spanish feed demand for wheat is expected to rise slightly, replacing corn and non-grain feed ingredients (NGFI).

In Poland, 1.1 MMT were exported during MY 02/03, in particular just prior to the end of the season, as most of the government held wheat stocks were liquidated. Unfortunately, the very poor 03/04 harvest led to a significant shortage of feed grains, with imports of wheat for 03/04 estimated to be around 800,000 MT. In 04/05, import estimates of 300,000 MT are based on the durum and high quality wheat needed for blending in flour and pasta production. Feed demand is set to decline by 200,000 MT due to reduced pig and livestock inventory.

Following the poor European harvest, with limited domestic availability of wheat, stocks were run down in 03/04 from 16.1 MMT at the start of the MY to an estimated 11.7 MMT at the end of the MY in June 2004. With a bumper crop expected in 2004, a substantial rebuilding of stocks is expected, with Post estimating stocks to rise to 16.7 MMT at the end of the MY 04/05.
MGR Archive 22.5.2004
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