By Philip Clarke Europe editor

EUROPEAN GRAIN markets are unlikely to recover for the rest of the season as exports continue to struggle and intervention stores fill up.

 Hopes that the reintroduction of export refunds for wheat to Third countries would give the trade a boost have been dashed by what traders describe as the “ultra-cautious” approach of market managers in Brussels.

Ahead of last week”s adjudication, shippers were saying that the commission would have to accept tenders for refunds of at least 10/t (7) to bridge the gap between EU supplies and Argentinean grain into the key markets of North Africa.

But, in the event, Brussels set the bar at just 4/t (2.80), enough to cover 134,000t of the 667,300t of wheat tendered by EU exporters.

Klaus Schumacher, head economist at Toepfer International in Germany, said that was not unexpected. “It”s always the same game. There are a few traders out there who have already sold wheat without refund, so they bid low to make sure they get their licences.

“The commission knows it needs 10/t to generate new business, but it will never go there in one step, as this would give it problems with the European Court of Auditors.”

The next round of tenders was due to be judged yesterday (Thursday) and Dr Schumacher was convinced Brussels would continue to pitch low. “The euro has weakened recently against the dollar and this has made EU grain more competitive. The commission will maintain a cautious approach.”

Pressure has also been put on shippers to use their export refunds immediately through the introduction of a “negative corrective”. “Normally, when a refund is awarded, the holder can claim a further 0.46/t a month until the grain is shipped,” said Glencore Grain. “The corrective cancels this out, encouraging the shipper to use the restitutions straight away.”

Trade reaction to the developments was negative, with the MATIF futures market in France dropping 1-1.5/t, despite the weaker euro. London futures also drifted lower.

Looking further ahead, merchants expect the EU market to continue to bump along at the intervention level.

So far, public grain stocks have grown from 3.6m tonnes at the start of the season to 5.7m tonnes last week, with a further 5.7m tonnes “under offer”.

Julian Bell of the Home-Grown Cereals Authority said everything now depended on how much the EU was prepared to spend exporting, and whether any weather problems developed as the new crop came out of winter dormancy.

philip.clarke@rbi.co.uk