21 July 1995

Cereal export aid ban welcomed by pig & poultry men

By Philip Clarke

PIG and poultry producers have welcomed the ECs recent decision to suspend all cereal export subsidies until Sept 7 as part of its effort to bring grain prices down.

"A step in the right direction" is how the NFU described the move. "It is totally consistent with what we have been pressing for since the beginning of the year," said pigs adviser, Dafydd Owen.

And in a letter to the EC, the British Poultry Meat Federation said it was "absolutely necessary this policy continues and that no further export refunds are given until EU cereal prices are reduced to intervention levels".

"CAP reform promised cereal users substantially lower prices and direct income payments to compensate," said the federation. "It has not worked. Cereal prices have risen to levels higher than in the last two years.

The move to end export subsidies, backed up with the release of a further 250,000t of grain from German intervention stores for Spain, came as little surprise to some grain traders.

"It has been obvious for some time the EC would do something in the face of the strong consumer lobby," said Tim Pollock, managing director of north-east co-op Tynegrain.

But so far the impact on grain prices has been minimal. New crop wheat fell about £1 on the news and is currently valued at £107 to £109/t ex-farm as available, depending on location.

It is quite likely the suspension of subsidies will be extended beyond Sept 7, especially as world wheat prices continue to rise. With the US Department of Agriculture again revising its crop estimates down and pointing to record low stocks this season the world wheat price is fast approaching EU levels. It currently stands at $180/t compared with $120 last September.

Some traders believe the world price will soon exceed the EU internal price, in which case exports to Third countries could even be charged a levy as happened in 1976.

Against this background the short-term prospects for cheaper feed grain for the UKs pig and poultry producers are not great.

By far the more important influence, therefore, will be the level of set-aside for next season.

The BPMF is clear where it wants this set – at 0%.

Only when the current tight supply position is rectified and intervention stores are a bit fuller will the commission have any real influence over the grain market.