Brussels in talks on keeping grain values in check

28 September 2001

Brussels in talks on keeping grain values in check

By Olivia Cooper

EUROPEAN grain prices are too high, according to the European Commission, which is discussing plans to keep values in check.

Brussels main concern is the threat of rising global inflation following the terrorist attacks in the US and it is considering three steps to reduce internal prices.

The first is to continue to refuse export refunds on all free-market wheat, barley and oats.

This means that cereals for export outside the EU will have to be sold at world market prices – k11/t (£6.88/t) below current internal prices. Although EU production is 10% down on last year, there is still a 10.75m tonne surplus, of which just 1.9m tonnes has been sold so far, says the HGCA.

Option two is to tender a large amount of intervention rye for sale onto the domestic market. With almost 4m tonnes of German stocks available, this would depress feed-quality cereal prices.

The third alternative would remove the k10/t import duty on Black Sea and Baltic cereals. This would effectively make central and east European grain £6.25/t cheaper to bring into the EU.

"This wouldnt impact directly on the UK because Black Sea wheat is still too expensive to import after freight costs," says James Maw, wheat trader for Glencore Grain. "But imports would flood into western Europe and push domestic prices down.

"Export demand to southern Europe and North Africa would be removed, so cheaper German, French and Danish wheat would then be available to the British consumer."

Following the news that the European Commission was starting to discuss its strategy, London wheat futures fell by £2/t for January, making a total fall this month of £5/t.

John Bensted-Smith, EC directorate general for agriculture, confirmed plans would be discussed in greater detail at this weeks meeting. Traders expect the measures will be pushed through within the next couple of weeks.

Gary Sharkey, wheat director for Grainfarmers, says the UK market is already overpriced and would have fallen in the long term. "With a 12m tonne crop we would have a 1.4m tonne surplus, which is growing with each cargo of imports.

"We are still £2-3/t too expensive on biscuit wheat, and German milling wheat is very competitive. I dont see current milling premiums holding for long."

Breadmaking premiums remain at £17/t, but decent premiums are available for almost every grade and quality. Some group 2 wheats for blending are worth just £2/t less. &#42

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