EU faces grain surplus dilemma

EUROPE could be left with a massive grain surplus this year unless officials in Brussels encourage more exports, traders have warned.

So far this season, grain exports have been slow and a mountain of stock is steadily building. Up until mid-January, EU grain sales overseas totalled only 13.2 million tonnes – 4.4m tonnes less than last year.

Traders say overseas sales are being hampered by the EU Commissions reluctance to grant reasonable export refunds.

Officials in Brussels last week granted export licences for 224,000 tonnes of wheat at Ecu15.49 and 65000 t barley at Ecu22.96.

But this was much as expected and failed to cheer the market.

Recent export refunds have been “disappointing”, according to Allied Grain. The reason, traders say, appears to be the commissions determination not to undercut US grain prices.

But avoiding competition with the USA means European farmers are having difficulty selling overseas, merchants argue.

According to the French co-operative, SIGMA, the commission should shift into “high gear”. Otherwise, a massive end of season surplus is guaranteed.

In Britain, up to 30% of last years harvest remains on-farm unsold. That compares with about 24% this time last year, according to traders BDR Agriculture.

Glencore Grain forecasts that as much as 10m tonnes of grain could be stored in intervention by June this year.

Unless more exports are encouraged, 1998 could see Europe with more grain than there are buyers. And if that happens, merchants are warning of further downward pressure on prices later in the year.