Grain and Feed Annual 2012

An Expert's View about Crops and Support Services in France

Posted on: 23 Apr 2012

Feed grain consumption is forecast little changed, albeit masking a switch away from wheat towards corn, barley and the minor grains,

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 4/13/2012 GAIN Report Number: EU-27 Grain and Feed Annual All eyes on the weather - again Approved By: Daryl Brehm Prepared By: Steve Knight Report Highlights: The weather has already made its mark on the MY2012/13 crop and is likely to remain the focus over the coming months. A severe cold spell in late January and early February caused above average winter losses in some parts of the EU27, especially France, meaning some fields will need to be resown to spring crops. A prolonged dry period through March and into April will also become a concern if rains are not forthcoming ahead of harvest. In spite of this, 284MMT of grain is forecast to be harvested this year. Feed grain consumption is forecast little changed, albeit masking a switch away from wheat towards corn, barley and the minor grains, while industrial grain usage is again forecast to rise. Overall, the balance suggests a similar availability of grain for export as compared to MY2011/12 but much will depend on the ultimate size and quality of the EU27 harvest. Executive Summary: In 2012, despite challenging weather, EU27 farmers are expecting another sizeable grain harvest of 284 MMT. If realized, this will be on a par with 2011 but still 29 MMT below the record crop harvested in 2008. The low carry in stocks from MY2011/12 and forecast for little year-on-year change in total domestic consumption mean there will be much focus on the crop as it develops over the coming months. With the exception of Hungary, Romania and Bulgaria where dry conditions delayed winter plantings, and Scandinavia which experienced overly wet conditions, meaning the crop in those regions was somewhat underprepared for winter, most of the EU27 experienced excellent planting conditions in the fall of 2011. This was followed by a relatively mild start to winter until a three week period of very cold weather in late January and the first half of February which affected much of the EU27. Snowfall was significant but windblown in places, especially in the east, but limited elsewhere. Neither set of conditions were ideal and caused much concern at the time, especially in France, with some market commentators talking of losses like those experienced in MY2003/4. With the onset of spring, it is now thought the main damage was not as bad as some feared but is still significant in France while Bulgaria, Romania and a number of other Member States experienced above average winter kill. In France, official estimates in early April show that more than half a million hectares of soft wheat, durum wheat and winter barley will have to be resown. To the east, in Germany, Poland, the Czech Republic and Hungary, while winter kill is thought to be above norm, it is still too early to confirm its extent. Bulgaria and Romania saw very heavy snow fall but high winds lead to stark variations in the level of cover provided. The combination of this with extremely cold temperatures has inevitably seen crops damaged. That said, these two countries are used to dealing with winter kill so the concerns are measured. To the south, both Spain and Portugal are reporting drought concerns which will need to be watched (See GAIN Reports SP1204 and SP1209). Elsewhere the outlook is much more positive. While Scandinavia suffered some particularly cold conditions, the crop is reported to have fared reasonably well over winter. In the UK, market commentators are upbeat about the current condition of the crop. Overall, the outlook for the EU27?s winter crop, mainly wheat but also barley, is generally positive . Further, where damage has occurred, the fields are not expected to be left to produce lower yielding crops. Rather, there will be a marginal increase in spring plantings of barley, corn and sunflowers. It is now a widespread lack of rainfall through March and April which is starting to cause some concern. Crop development and yields are not currently reported as having been affected but rain is certainly needed, not just to improve soil moisture but also to ensure the efficacy of fertilizer applications. As previously alluded to, this is especially the case in the Iberian Peninsula but other countries in the west where snow cover was limited, notably the UK and France, are also very much in need of rain. Consequently, any factors that might have a negative effect on yield or quality are attracting significant attention from the market, not least due to the impact this will have on the EU27?s exportable grain surplus. Forecast MY2012/13 EU27 grain production exceeds domestic consumption by 8.5 MMT. MY2012/13 is expected to see total feed grain consumption little changed year-on-year but this masks an anticipated shift from wheat to corn, barley and minor crops such as rye, oats and sorghum. An increase is again seen in Food, Seed & Industrial (FSI) use of grain, predominantly due to increased grain use for renewable transportation fuels. Third country imports, principally corn, are forecast unchanged with increased corn imports offsetting a forecast decline in wheat imports. Exports of wheat are currently forecast unchanged following a significant decline in MY2011/12 but much will depend on developments in the latter months of this season. Carry out stocks, down 2 MMT in MY2010/11, are forecast to fall a further 1 MMT in MY2012/13, reaching just 25MMT. As such, there is little room in the balance for a supply shock should the current grain harvest forecast not be achieved. Commodities: Select Author Defined: Introduction This report presents the first outlook for grain and feed, and Production, Supply and Distribution (PS&D) forecasts for the Marketing Year (MY) 2012/13. Unless stated otherwise, data in this report is based on the views of Foreign Agricultural Service analysts in the EU27 and is not official USDA data. This report would not have been possible without the valuable expert contributions from the following Foreign Service analysts: Xavier Audran, FAS/Paris Stefano Baldi, FAS/Rome Ornella Bettini, FAS/Rome Mila Boshnakova, FAS/Sofia Monica Dobrescu, FAS/Bucharest Bob Flach, FAS/The Hague Marta Guerrero, FAS/Madrid Steve Knight, FAS/London Roswitha Krautgartner, FAS/Vienna Asa Lexmon, FAS/Stockholm Sabine Lieberz, FAS/Berlin Jana Mikulasova, FAS/Prague Ferenc Nemes, FAS/Budapest Piotr Rucinski, FAS/Warsaw Barrie Williams, FAS/USEU/Brussels HA = Hectares MT = Metric Tonne MY = Marketing Year. Post and USDA official data both follow the EU27 local marketing year of July to June except for corn which follows an October to September calendar. TY = July to June for wheat and October to September for course grains Wheat Wheat EU-27 2010/2011 2011/2012 2012/2013 Market Year Begin: Jul 2010 Market Year Begin: Jul 2011 Market Year Begin: Jul 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 26,106 26,100 25,761 25,600 25,000 Beginning Stocks 16,157 16,157 11,693 11,693 12,943 Production 135,674 135,674 137,486 137,500 134,500 MY Imports 4,712 4,712 7,500 7,500 6,500 TY Imports 4,712 4,712 7,500 7,500 6,500 TY Imp. from U.S. 1,316 1,316 0 0 0 Total Supply 156,543 156,543 156,679 156,693 153,943 MY Exports 22,850 22,850 17,000 17,000 17,000 TY Exports 22,850 22,850 17,000 17,000 17,000 Feed and Residual 52,500 52,500 55,500 57,500 55,000 FSI Consumption 69,500 69,500 70,000 69,250 69,750 Total Consumption 122,000 122,000 125,500 126,750 124,750 Ending Stocks 11,693 11,693 14,179 12,943 12,193 Total Distribution 156,543 156,543 156,679 156,693 153,943 1000 HA, 1000 MT, MT/HA EU27 wheat production is currently forecast to fall 3 MMT to 134.5 MMT in MY2012/13, 16 MMT below the record harvest achieved in 2008. Despite an initial increase in the planted area in Germany, Spain, Hungary, Italy and France, losses and a consequent switch to other spring crops in the likes of the latter and a reduced planted area in Bulgaria, the Czech Republic, Romania and Scandinavia, means the total area planted to wheat is forecast to have fallen to 25 MHa . With the exception of Hungary, Romania and Bulgaria where dry conditions delayed or limited plantings, and in Scandinavia where wet conditions had a similar impact, favorable conditions across most of the EU 27 last fall were followed by a mild start to winter. Late January saw the onset of a very cold period with significant snow fall in the east and sustained cold conditions elsewhere. These conditions prompted speculation in some countries, especially France, of a repeat of the disastrous crop of MY2003/04. While these fears do not appear to have been realized, in early April, the French Ministry of Agriculture estimated wheat winter kill losses at 362,000 hectares, of which 12,000 hectares are durum wheat. A number of other countries are also thought to have experienced higher than normal winter kill but Bulgaria and Romania are the only ones currently reporting significant damage. They are used to challenging winters and are expected to simply increase plantings of spring crops such as corn and sunflowers. That said, an increase in spring plantings of alternate crops is also expected in Germany, through Poland and into the Czech Republic and Hungary. Generally, damaged crops are not expected to be left to produce lower yields. Only in Spain and Portugal do any significant concerns remain at this time - conditions were very dry at planting and, following the driest winter ever recorded in Spain, rain is needed to prevent significant wheat losses. That said, this need for rain is increasingly being shared by other Member States following a very dry period through March and into April. This has reduced otherwise improved soil moisture. The wheat crop is still reported to be generally good but the situation warrants close monitoring, especially in France, the UK and Germany where the dry weather is also reducing fertilizer efficacy. In Italy, following a significant decline in size last year, the durum wheat crop is forecast to recover. Overall, sentiment is good but with the EU27 entering a critical yield determining weather period, this could change. Any downward movement in yield expectations or reduction in likely quality will be the subject of interest to the market given the tight EU27 balance this season. Total EU27 wheat consumption is forecast to decline marginally in MY2012/13, mainly due to a reduction in feed use. Other grains are expected to be more price competitive while the increase in on-farm consumption seen in MY2011/12 is not expected to be repeated. Industrial use of wheat is forecast to rise once more following a slight decline in MY2011/12. That was mainly due to reduced demand in the starch sector. However, MY2012/13 is forecast to see static demand in the starch and milling sectors with the bioethanol sector providing the underlining support to consumption demand. A second wheat-based bioethanol plant, capable of processing 1.1 MMT of wheat per year, is scheduled to open in the UK this summer. This will double the UK?s potential capacity but it should be noted that the opening of this plant has been subject to a number of delays while the other UK plant is currently closed but scheduled to re-open in June at the earliest. This uncertainty means the UK number could be subject to downward revision. Elsewhere in the EU27, increased wheat usage in the bioethanol sector is foreseen in the Netherlands. MY2012/13 wheat imports are currently forecast to reach 6.5 MMT, down 1 MMT on MY2011/12. In that season, importers carried over unused quota allocation for MY2010/11, boosting imports in the first quarter, mainly into Spain. This will not be repeated next season. Throughout the first quarter of 2012 the EU27 has fully used its 572,000 MT U.S. specific TRQ of medium to low-quality wheat. Concerns about the upcoming crop along with favorable price relations have triggered U.S. wheat imports under TRQ, which consist of SRW for both feed and milling purposes. EU27 wheat export expectations remain at 17 MMT in MY2011/12. In mid-April, with just two and a half months of the season to go, just over 12.75 MMT of export licenses have been granted. The EU27 exported a record 25 MMT of wheat in MY2008/09. This was followed by 22 MMT in MY2009/10 and nearly 23 MMT in 2010/11. That said, last season saw the Russian export ban and restrictions on Ukrainian supplies seeing France, the EU27?s primary wheat exporter, reporting a very strong pace of exports, mainly to its traditional markets in North Africa. In MY2011/12, the EU27 has faced increased competition on third country markets, most recently from the U.S. into North Africa. EU27 wheat exports in MY2012/13 are also forecast to reach 17 MMT, despite a reduction in forecast global demand. The competitiveness of U.S. wheat is expected to wane at the beginning of the season while Black Sea origin wheat, still expected to present significant competition, is forecast to be lower in volume than this season following the challenging winter. MY2011/12 is now expected to see some recovery in stocks, reflecting the reduction in the competitiveness of EU27 wheat on third country markets. However, the tight balance in MY2012/13 means this increase is forecast to be short lived. Barley Barley EU-27 2010/2011 2011/2012 2012/2013 Market Year Begin: Jul 2010 Market Year Begin: Jul 2011 Market Year Begin: Jul 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 12,493 12,432 12,061 11,950 12,350 Beginning Stocks 15,532 15,532 7,466 7,630 5,030 Production 53,028 53,392 52,254 51,500 54,000 MY Imports 174 174 400 400 200 TY Imports 286 286 350 350 200 TY Imp. from U.S. 0 0 0 0 0 Total Supply 68,734 69,098 60,120 59,530 59,230 MY Exports 4,868 4,868 2,800 2,800 2,400 TY Exports 4,594 4,594 2,800 2,800 2,400 Feed and Residual 41,200 41,400 37,000 36,500 37,000 FSI Consumption 15,200 15,200 15,000 15,200 15,200 Total Consumption 56,400 56,600 52,000 51,700 52,200 Ending Stocks 7,466 7,630 5,320 5,030 4,630 Total Distribution 68,734 69,098 60,120 59,530 59,230 1000 HA, 1000 MT, MT/HA The total EU27 planted barley area is forecast up 400,000 Ha in MY2012/13 with notable increases in France (spring barley replacing winter wheat killed by frost), Italy and Denmark. Overall, the EU27 barley crop is currently forecast up 2.5 MMT at 54 MMT. As compared to wheat, a larger proportion of the EU27 barley crop is spring sown so there are more unknowns at this time but the common factor is the current dry weather afflicting much of the EU27. Rains in April and May would do much to alleviate any concerns, especially in Spain. Total EU27 barley consumption, is forecast little changed in MY2012/13 with feed usage up 500,000 MT and overall FSI usage static. Up to mid-April, 2.58 MMT of export licenses had been granted and MY2011/12 EU27 barley exports are currently expected to reach 2.8 MMT with a decline of 400,000 MT forecast for MY2012/13. MY2011/12 opened with no intervention stocks. As such, all barley is now in private stocks. The tight balance in MY2011/12 is expected to see the season close with just 5 MMT with a further marginal reduction forecast for MY2012/13. Corn Corn EU-27 2010/2011 2011/2012 2012/2013 Market Year Begin: Oct 2010 Market Year Begin: Oct 2011 Market Year Begin: Oct 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 7,980 7,984 8,780 8,750 9,200 Beginning Stocks 5,208 5,208 4,784 4,962 5,262 Production 55,795 55,973 64,524 64,550 65,000 MY Imports 7,359 7,359 4,500 4,250 5,250 TY Imports 7,359 7,359 4,500 4,250 5,250 TY Imp. from U.S. 911 911 0 0 0 Total Supply 68,362 68,540 73,808 73,762 75,512 MY Exports 1,078 1,078 2,500 2,500 2,500 TY Exports 1,078 1,078 2,500 2,500 2,500 Feed and Residual 47,500 47,500 50,400 50,500 51,500 FSI Consumption 15,000 15,000 15,500 15,500 16,000 Total Consumption 62,500 62,500 65,900 66,000 67,500 Ending Stocks 4,784 4,962 5,408 5,262 5,512 Total Distribution 68,362 68,540 73,808 73,762 75,512 1000 HA, 1000 MT, MT/HA Corn production in MY2011/12 is expected to have just surpassed 64.5 MMT following an excellent harvest across the EU27, and contrary to the expectations of many market commentators in the main producing countries of France, Germany, Spain, Italy, Hungary and Romania. In MY2012/13, the planted area is forecast to rise to 9.2 MHa with the main increases in France, Germany, Bulgaria and Romania. This is in part due to improved seed supply in the latter two countries but also due to fields of wheat and barley being replanted following winterkill and strong underlying demand for corn. The Spanish area is forecast lower based on lower irrigation water availability. Overall, with yields not currently expected to match those seen last year, production is put only marginally higher at 65 MMT. With the exception of the Iberian Peninsula, the current dry period afflicting the EU27 is not of too much concern, as yet. Indeed, 2011 saw very dry conditions at this time. That said, as with the other crops, timely rain will be needed to ensure there are not yield losses. Corn imports are now expected to reach 4.25 MMT in MY2011/12. Spanish imports of corn were reduced following increased imports of feed wheat due to the aforementioned carryover of wheat import licenses from the previous season. MY2012/13 will not see a repeat of this scenario so Spanish, and EU27 imports overall, are forecast to rise 1 MMT. Ukraine and Serbia will be the main suppliers but increased imports also expected from the likes of Russia and Croatia. Demand for corn in the FSI sector is expected to rise 500 MMT in MY2011/12 and by a similar amount in MY2012/13. With usage in the starch sector forecast unchanged, the increase is accounted for by bioethanol production - principally in Hungary but also in Spain, where it replaced wheat and barley - and biogas production. Feed consumption, expected up in MY2011/12 reflecting the larger crop and an increase in on-farm feeding, is currently forecast to rise a further 1 MMT in MY2012/13 due to the increase in available supplies. Rye Rye EU-27 2010/2011 2011/2012 2012/2013 Market Year Begin: Jul 2010 Market Year Begin: Jul 2011 Market Year Begin: Jul 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 2,594 2,631 2,283 240 2,275 Beginning Stocks 1,727 1,727 1,236 1,415 915 Production 7,796 7,975 6,884 6,850 7,400 MY Imports 19 19 100 25 25 TY Imports 36 36 100 25 25 TY Imp. from U.S. 0 0 0 0 0 Total Supply 9,542 9,721 8,220 8,290 8,340 MY Exports 106 106 50 75 75 TY Exports 71 71 75 75 75 Feed and Residual 3,500 3,700 2,600 2,800 3,200 FSI Consumption 4,700 4,500 4,750 4,500 4,500 Total Consumption 8,200 8,200 7,350 7,300 7,700 Ending Stocks 1,236 1,415 820 915 565 Total Distribution 9,542 9,721 8,220 8,290 8,340 1000 HA, 1000 MT, MT/HA Rye is predominantly planted to less fertile sandy regions. The main producing and consuming countries for rye in the EU27 are Germany and Poland, accounting for about three quarters of the total EU27 rye market. MY2012/13 is currently forecast to see a continuation of last year?s much reduced planted area but improved yields with production forecast up over 500, 000 MT at 7.4 MMT, albeit still 600,000 MY below MY2010/11. Almost half of the rye production is used in animal feeds and increased usage is forecast in MY2012/13 as an alternate to other grains, especially wheat. FSI had been rising slowly but steadily year-on-year as a growing share of rye was converted into bioethanol and in the form of rye-whole-plant silage in biogas digesters, mainly in Germany. Sorghum Sorghum EU-27 2010/2011 2011/2012 2012/2013 Market Year Begin: Jul 2010 Market Year Begin: Jul 2011 Market Year Begin: Jul 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 114 113 131 110 110 Beginning Stocks 24 24 22 16 21 Production 621 625 751 670 600 MY Imports 921 921 50 100 300 TY Imports 922 922 50 100 300 TY Imp. from U.S. 594 594 0 0 0 Total Supply 1,566 1,570 823 786 921 MY Exports 4 4 5 5 5 TY Exports 5 5 5 5 5 Feed and Residual 1,535 1,540 800 750 890 FSI Consumption 5 10 5 10 10 Total Consumption 1,540 1,550 805 760 900 Ending Stocks 22 16 13 21 16 Total Distribution 1,566 1,570 823 786 921 1000 HA, 1000 MT, MT/HA MY2007/08 saw significant interest in the sorghum market when tight supplies of feed grains saw EU27 importers - mainly in Spain, the Benelux and France ? dramatically increase their purchases of mainly U.S. sorghum to nearly 6 MMT. This opened the market?s eyes to the possibility of utilizing sorghum in the feed ration and has increased the possibility of future imports. While MY2011/12 is expected to see very limited imports, in MY2012/13 300,000 MT could be imported with Spain being the main destination once this year?s US sorghum crop is available and provided that the sorghum-corn spread proves to be favorable. Oats Oats EU-27 2010/2011 2011/2012 2012/2013 Market Year Begin: Jul 2010 Market Year Begin: Jul 2011 Market Year Begin: Jul 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 2,723 2,677 2,681 2,625 2,625 Beginning Stocks 1,224 1,224 687 735 840 Production 7,370 7,318 8,013 7,750 7,850 MY Imports 2 2 5 5 5 TY Imports 6 6 5 5 5 TY Imp. from U.S. 0 0 0 0 0 Total Supply 8,596 8,544 8,705 8,490 8,695 MY Exports 109 109 150 100 100 TY Exports 113 113 150 100 100 Feed and Residual 6,000 5,950 6,000 5,800 5,900 FSI Consumption 1,800 1,750 1,800 1,750 1,750 Total Consumption 7,800 7,700 7,800 7,550 7,650 Ending Stocks 687 735 755 840 945 Total Distribution 8,596 8,544 8,705 8,490 8,695 1000 HA, 1000 MT, MT/HA The four main producers of oats in the EU27 are Poland, Finland, Spain and Germany accounting for 50 percent of the production. The importance of oats is diminishing in EU27 grain production although the organic industry still has an interest in this grain for crop rotation purposes and growing demand for food and feed use. Non- organic farmers are gradually reducing their oats area such that the total production area is in long term decline. After very poor yields in MY2010/11, this season saw a crop of 7.75 MMT. A similarly sized crop is currently forecast for MY2012/13. Trade in oats is almost exclusively intra-EU with the minor export volume to non-EU27 countries originating from Finland and Sweden. The destinations are mainly Switzerland and the U.S. - the latter has traditionally been the largest market for horse feed ? but total trade in recent years has been limited to little more than 100,000 MT. Total annual FSI use is consistently around 1.75 MMT, a small portion of which - less than 50,000 MT - is used for the production of bioethanol and biogas. The rest is fed to animals, a forecast 5.9 MMT in MY2012/13. Mixed Grain Mixed Grain EU-27 2010/2011 2011/2012 2012/2013 Market Year Begin: Jul 2010 Market Year Begin: Jul 2011 Market Year Begin: Jul 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 4,283 4,299 4,292 4,289 3,800 Beginning Stocks 2,139 2,139 1,489 1,495 1,145 Production 14,850 14,956 14,811 14,500 14,750 MY Imports 0 0 0 0 0 TY Imports 0 0 0 0 0 TY Imp. from U.S. 0 0 0 0 0 Total Supply 16,989 17,095 16,300 15,995 15,895 MY Exports 0 0 0 0 0 TY Exports 0 0 0 0 0 Feed and Residual 14,300 14,450 14,000 13,650 13,700 FSI Consumption 1,200 1,150 1,200 1,200 1,200 Total Consumption 15,500 15,600 15,200 14,850 14,900 Ending Stocks 1,489 1,495 1,100 1,145 995 Total Distribution 16,989 17,095 16,300 15,995 15,895 1000 HA, 1000 MT, MT/HA Mixed grain numbers include triticale and the threshed, dry seeds of wheat, barley, corn, oats, rye and sorghum grown and harvested in the same field. The main producing countries are Poland, Germany and France, together accounting for 85 per cent of the production. MY2012/13 is forecast to see a marginal increase in production to 14.75 MMT but on a recued area. Triticale is almost exclusively used in animal feeding. However, a growing portion of triticale is used in bioethanol and biogas production in Germany and Poland, accounting for an estimated total of about 450,000 MT. Following the large build up in stocks in MY2009/10, principally in Poland and used as feed the following year, these have now stabilized at just under 1 MMT. Any increase in feed usage forecast for MY2012/13 will see a reduction in carryover stocks. Rice Rice, Milled EU-27 2010/2011 2011/2012 2012/2013 Market Year Begin: Sep 2010 Market Year Begin: Sep 2011 Market Year Begin: Sep 2012 USDA Official New Post USDA Official New Post USDA Official New Post Area Harvested 468 481 462 480 465 Beginning Stocks 1,120 1,120 1,056 1,056 1,021 Milled Production 2,029 2,104 2,063 2,010 1,950 Rough Production 2,926 3,052 2,976 2,980 2,880 Milling Rate (.9999) 6,935 6,894 6,932 6,745 6,771 MY Imports 1,391 1,391 1,500 1,500 1,500 TY Imports 1,475 1,475 1,400 1,400 1,500 TY Imp. from U.S. 87 110 0 0 0 Total Supply 4,540 4,615 4,619 4,566 4,471 MY Exports 259 259 245 245 235 TY Exports 241 241 245 245 235 Consumption and Residual 3,225 3,300 3,353 3,300 3,300 Ending Stocks 1,056 1,056 1,021 1,021 936 Total Distribution 4,540 4,615 4,619 4,566 4,471 1000 HA, 1000 MT, MT/HA Policy Imports The EU limits the entry of lower priced grains from non-EU countries by means of a system of import duties and quotas. Under the WTO Uruguay Round, all import quotas and variable levies applied to EU imports of grains and processed cereals were fixed or ?tariffed? and subsequently reduced by 36 percent over the six year period of July 1, 1995 to June 30, 2001. However, under the Blair House Accord concluded between the United States and the EU in 1993, it was agreed that the difference between the grains import price (cost insurance freight [cif] duty paid in Rotterdam) and the EU?s intervention price cannot be greater than 55 percent. The EU then developed a system where duties were set on the basis of separate reference prices for six grain types, and applied to imports of high quality wheat, durum wheat (high quality), durum wheat (medium quality), maize (corn), flint maize, rye and sorghum. The resulting duty has been set at Euro 0/Metric Ton (MT) for durum wheat and high quality wheat since the beginning of the 2010/11 marketing year. The duty for corn has been calculated at Euro 0/MT since August 17, 2010 and the duty for sorghum and rye at Euro 0/MT since October 19, 2010. Reference grains for calculating import duties Reference variety Reference market High quality wheat U.S. hard red spring No. 2 Minneapolis Durum wheat (high U.S. hard amber durum No. 2 Minneapolis quality) Durum wheat (medium U.S. hard amber durum No. 2 Minneapolis quality) Maize (corn) U.S. yellow corn No. 3 Chicago Mercantile Exchange Flint maize U.S. yellow corn No. 3 Chicago Mercantile Exchange Other feed grains (rye, U.S. yellow corn No. 3 Chicago Mercantile sorghum) (Commission Implementing Regulation (EU) No Exchange 643/2011, July 1, 2011) Theoretical example illustrating method of calculating EU import duties (Euro/ Representative EU World FOB Freight Representative EU MT) world standard Reference price premium world price duty price (a) (b) (c) (d) (e) = (b)+(c)+(d) (a)-(e) Maize Chicago yellow 159.88 68.46 16.20 15.56 100.22 59.66 (corn) corn No. 3 Notes: Reference price = EU intervention price is 1.55 times the sum of Euro 101.31 plus Euro 0.46 times the four months between the start of the MY July 1 and the start of the buying-in period November 1. [i.e. 1.55 x(101.31 + (Euro 0.46 x 4))] In January 2003, the EU discontinued this system for low and medium quality wheat and barley. A system of quotas was introduced to protect EU producers from lower priced Black Sea imports, the duty for which had been calculated on the basis of higher U.S. prices. As such, imports entered the EU at very competitive rates. More specifically, for medium and low quality wheat, a maximum annual tariff rate quota (TRQ) of 2,981,600 MT has been opened for medium and low quality wheat. A country specific quota of 572,000 MT is allocated for imports originating in the United States and 38,835 MT for those originating in Canada. The remaining 2.372 million MT is split into four equal tranches of 592,000 MT each on a quarterly basis, and is open to other non-EU countries on a first come first served basis. From January 1, 2012, there has been a new ergo omnes (open to all) quota consisting of one tranche of 122,790 MT for medium and low quality wheat. This has been opened to take account of market loss arising from the accession of Bulgaria and Romania to the EU in 2007. The duty for imports under the quota is set at Euro 12/MT, while imports outside the quota are subject to a duty of Euro 95/MT. For barley, the quota of 50,000 MT applies to malting barley at a duty of Euro 8/MT and a separate quota of 300,000 MT applies for other types of barley at Euro 16/MT. Barley outside the quota faces duties of Euro 93/MT. The European Commission?s Cereals Management Committee which met in February 2011 voted to suspend import duties on certain grains imported into the EU from February 28, 2011 until the end of June 2011. The measure has been prolonged until June 30, 2012. The move was aimed at easing the pressure on the EU market, especially for animal feed. The suspension relates to existing tariff rate quotas for low and medium quality soft wheat and for feed barley, where preferential tariffs of Euro 12/MT and Euro 16/MT respectively were reduced to zero for the volumes permitted under the quota. Reductions for maize(corn) and sorghum ? ?Abatimento? The accession of Spain to the EU resulted in the application of common EU tariff barriers to Spanish imports and the loss of competitiveness for imports from non-EU countries. An agreement between the EU and the United States allows for the import of a fixed quantity of non-EU corn and sorghum at a preferential import duty as compensation for the loss of the Spanish market. The current agreement applies to 2 million MT of corn and 0.3 million MT of sorghum. The EU also operates a reduced tariff import quota of 500,000 MT of corn into Portugal (maximum tariff of Euro 50 per MT). Amounts are reduced by any quantity of grain substitutes (e.g. starch residues and citrus pulp) imported in the same year. Flint maize is not permitted to be included within the concession. Following the 2004 enlargement of the EU and a subsequent agreement between the EU and the United States, the EU opened an additional annual duty-free tariff quota of 242,074 MT of imports of corn from non-EU countries ? the quota has been open since July 2006. Exports The EU?s ability to grant export subsidies, especially on wheat, became limited by WTO export subsidy limit commitments with the implementation of the WTO Uruguay Round Agreement on Agriculture. As a part of that Agreement, GATT signatories committed to reduce the level of budgetary expenditure on export subsidies by 36 percent and the volume of subsidized exports by 21 percent over the six year period between July 1, 1995 and June 30, 2001. The WTO Ministerial meeting in Hong Kong in December 2005 agreed that all forms of agricultural export subsidy should be phased out by the end of 2013, with a substantial part already realized by 2010. Within these constraints, the European Commission may fix refunds which enable EU exporters to compete on the lower priced world market. These may also to be fixed by tender. No export refunds have been granted on grains since September 2006 and grain-based processed products since 2007. Intervention mechanism EU legislation allows the EU to intervene in markets by purchasing grains from farmers and traders at an intervention price of Euro 101.31/MT, which reflects the delivered to store price at which EU purchases are made. Selling into intervention is aimed to be the market of last resort for farmers and traders. Intervention purchases may be made between November 1 and May 31 for common wheat, barley, corn, sorghum and durum wheat. Grain held in intervention stores is disposed of mainly through sale by tender onto the domestic market or for export, although a proportion is released for the most deprived people in the EU. The intervention arrangement was abolished for rye with effect from marketing year (MY ? July 1 to June 30 for all grains and grains products) 2004/05. Guaranteed intervention quantities were reduced to 0 MT for corn from MY 2009/10, durum wheat from MY 2009/10, barley from 2010/11 and rice from MY 2009/10. By reducing the guaranteed intervention quantity to 0, the EU maintains the right to reintroduce intervention if market conditions are considered to be appropriate. A guaranteed intervention quantity of 3 million MT at the intervention price applies to soft wheat with effect from MY 2010/11. When that quantity has been reached, intervention may be made through tenders or bids. In the absence of guaranteed intervention quantities, tendering procedures were introduced for barley, corn and sorghum with effect from MY 2010/11. Special support measures EU legislation allows for special measures in addition to intervention to be taken to support the market for grains in time of crisis. These measures would take place on an ad hoc basis and be proposed by the European Commission and decided by the Member States at the Management Committee. The transfer of grains between regions of the EU to relieve pressure is possible. For example, grain has been released occasionally from intervention to relieve animal feed shortages in drought-hit regions in the EU. Biotechnology Two biotech products, MON 810 corn and the Amflora starch potato, are approved for cultivation in the EU. Monsanto?s MON 810 received its original approval for cultivation in the EU in 1998, and is currently undergoing the approval renewal process. Since 2007, the area sown with MON 810 in the EU has remained fairly stable at between 91,000 hectares and 115,000 hectares. ISAAA data shows that MON 810 is largely grown in Spain, the Czech Republic, Portugal, Poland, Slovakia and Romania. Cultivation of MON 810 corn in the EU (hectares) 2005 2006 2007 2008 2009 2010 2011 Spain 53225 53667 75148 79269 76057 76575 97326 France 492 5000 21174 - - - - Czech Republic 150 1290 5000 8380 6480 4830 5091 Portugal 750 1250 4263 4851 5094 4868 7724 Germany 400 950 2685 3173 - 15 2 Slovakia - 30 900 1900 875 1248 761 Romania [1] 110000 90000 350 7146 3244 822 588 Poland [2] - 100 327 3000 3000 3000 3000 Sweden - - - - - 80 15 Total 165017 152287 109847 107719 94750 91438 114507 Source: ISAAA (International Service for the Acquisition of Agri-biotech applications) report ?Global Status of Commercialized Biotech/GM Crops: 2011? [1] 2005 & 2006 - biotech soybeans; 2007 onwards - biotech corn [2] Polish area is not confirmed by the public authorities BASF?s Amflora was approved for cultivation in the EU in March, 2010, and is estimated to have been grown on some 225 hectares in the Czech Republic, Sweden and Germany. In 2012, BASF decided it will stop commercialization and research activities on European potato varieties. It further announced the relocation of its corporate headquarters from Germany to the United States. Factors discouraging farmers from cultivating biotech crops in the EU include: Public field registers detailing the location of commercially grown biotech crops (compulsory in most Member States); National cultivation bans in Austria, France, Germany, Greece, Luxembourg and Hungary; Stringent national coexistence measures in Belgium, Czech Republic, Germany, Hungary, Portugal, Romania and Slovakia; Threats by anti-biotech non-governmental organizations. Despite these factors, many EU farming groups remain interested in using plant biotechnology because of the resultant yield benefits and cost saving. For more information on biotechnology in the EU, see GAIN Report Number FR 9074 ?EU 27 Agricultural Biotechnology Annual? of July 27, 2011. Report Title Date Released Still no Rain in Spain 3/7/2012 No Rain in Spain falling on the Plain 2/8/2012 Preliminary Reports on Winterkill Loses in Poland_Warsaw_Poland_3-30-2012 3/30/2012
Posted: 23 April 2012

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