EU supports exports as Euro strengthens

By FWi staff

THE European Commission has issued its first export subsidies since August last year.

Just before Christmas it agreed a 5/t refund on 213,000 tonnes of open market wheat.

The move was helped by a continuing rally of the Euro, which at the time was at a five-month high against the US Dollar, at $0.94.

This made EU grain more expensive on the world market, hence the need to grant subsidies to make it more competitive.

“It has enabled a bit more of a marketing opportunity, but even so there arent that many farmers wanting to get rid of stocks at the moment,” says Banks Agricultures Richard Whitlock.

“Its difficult to say exactly why these subsidies were issued. It means that we can now compete with the USA, but only a month ago the Commission was knocking this and we werent competitive at all.”

Whether the Commission continues to agree refunds its too early to predict, says the HGCAs Rupert Somerscales.

“In about two weeks time we will have a better idea of what they are thinking, but there are several factors that have to be considered, such as budgetary constraints and WTO export subsidy limits.

But in the first few months of the season prices were competitive and no subsidies were needed, so these factors arent going to play a major part, he comments.

“However if the Commission doesnt grant refunds it will come under pressure – and it doesnt want to stall EU exports when there are still a lot of stocks.

“As far as UK farmers are concerned it is certainly good news as it is keeping the export momentum going.

“We are in a good position and as long as prices remain competitive and we continue to maintain a competitive discount to French wheat we should get the 2.5m-tonne surplus out,” says Mr Somerscales.

Mr Whitlock believes that what is more important is the fact that world stocks are down and drilling prospects in the UK and northern Europe are looking poor.

“Next seasons harvest is going to be smaller and therefore prices will carry.

“The weaker Sterling has certainly helped support prices which have risen 2-3 in the last two weeks. Feed wheat for January 2001 is currently worth about 64-66/t,” says Mr Whitlock.

“It is certainly a good move to carry from old stock to new, if farmers have the space to do so.”

• 1 = $0.9423 on 02 January, 2001