Slowdown in exports expected due to abundant world supply and low prices.
BRUSSELS, BELGIUM – E.U. cereal production dropped 5.5% in 2016-17 due to smaller-than-average soft wheat and maize (corn) harvests, the E.U. said in its Short-Term Outlook for E.U. Agricultural Markets in 2017 and 2018.
This will likely mean a slowdown in exports due to the abundant world supply and low prices, the report said. Projections for E.U. total exports in 2016-17 are 35.2 million tonnes, below the three previous marketing years. Total E.U. wheat exports are projected at 24 million tonnes.
World cereal production in 2016-17 is expected to reach an all-time record of 2.1 billion tonnes, according to the International Grain Council (IGC). World wheat production is estimated at a record 752 million tonnes and corn production is expected to reach 1.045 million tonnes.
In contrast, the 2016-17 E.U. harvest is confirmed to be 2.2% below the five-year average and 5% below last year’s harvest at 294.5 million tonnes. Late spring and early summer conditions in northwestern Europe, particularly France, Belgium and south Germany, severely affected the soft wheat production in those regions.
The E.U. usable production of soft wheat was 134.3 million tonnes, 3% below the last five-year average, the report said. The situation, however, varies between some member states where the harvest is 20%-28% below average (France, Belgium, the Netherlands and Denmark) and others where the harvest is 10%-20% above average, in central-eastern, south-eastern and south-western Europe, and the Baltic states where it is even higher (25%-27% above average in Latvia and Lithuania).
The E.U. corn harvest declined for the second year in a row, reaching 60.4 million tonnes, 8% below the last five-year average, with low levels in north-western, southeastern and south-western Europe due to heat and/or drought in these regions. Production was 17%-25% below the last five-year average in major producing countries such as Romania, France, Spain, Italy and Germany. This was partly compensated for by an excellent harvest in central Europe (Hungary and Poland in particular).
E.U. cereal imports are likely to decrease slightly to 18.5 million tonnes. Soft wheat imports are declining and the feed wheat demand, met by Ukraine last year, will be covered by the Baltic states.
Despite the lower E.U. harvest, corn imports should remain stable because Hungary can supply the E.U. market and world prices are increasing slightly.
Feed use of wheat is expected to decrease by 3.4% compared to the previous marketing year. There is, however, a sharp increase in barley feed use to 40.6 million tonnes, thanks to a smaller decrease in availability and reduced export demand. Corn feed use is also decreasing slightly because of lack of availability, although prices are low.
Biofuels uses are increasing slightly, particularly for corn which is progressively replacing cereals such as wheat as feedstock for ethanol production. This situation should result in a tightening of E.U. cereals stocks at the end of the 2016-17 marketing year.
These stocks, which are below 40 million tonnes, are approaching 2010 and 2013 levels.
Prospects are good so far for 2017-18, the report said. Since winter cereals were sown, there have been no major climatic conditions in the E.U. or neighboring countries. There are some minor areas of concern, in particular a shortage of rain in central Europe, Scandinavia and the Baltic states.
Cold temperatures have also been registered in central, south-eastern Europe and Ukraine, but do not seem to have generated significant frost-kill damage, which has occurred in certain areas of Spain, Scandinavia, Germany, Hungary, Romania and southern Russia, the report said.
In these favorable conditions, areas sown with cereals (excluding rice) are estimated to reach a total of 56.9 million hectares in 2017-018 in the EU, 0.5% above last year's total area, but 1% below the last five-year average. The areas of triticale, rye and soft wheat are estimated to be below the last five-year average, while durum wheat and barley will be above this level.
Given these assumptions for planted areas and, in the absence of major climatic disruption, i.e. with yields following historical trends, total E.U. cereal production could reach 313 million tonnes in 2017-18. This is 6% higher than last year and 3% above the last five-year average, the report said. This outlook will serve to keep prices at their current low levels.
The EU 2016-17 oilseeds harvest of 31.1 million tonnes is 3.3% lower than last year's. This, however, is still higher than the last five-year average by 0.4%, with the increase in soybeans offsetting the decrease in rapeseed and sunflower.
Soybean production in Europe is expected to be 2.5 million tonnes, 5% above last year’s harvest, and reaching more than 2 million tonnes for the second year in a row. Together with protein crops, soybean benefitted from both the voluntary coupled support scheme in numerous member states and greening measures (implemented as nitrogen fixing crops in Ecological Focus Areas).