* Price support suspended for feedgrains
* Remaining milling wheat support will cushion
* Southern Europeans wary of competition
By Martin Roberts
MADRID,
March 4 (Reuters) - European grain farmers can expect volatile prices
after Brussels partially removes a safety net in May, and cannot
readily switch to other crops and will have to deal with market forces
as best they can. As part of a drive towards a free market,
from May 31 the European Union will suspend automatic
"intervention", the traditional way it has supported the market by
offering to buy feed grains if prices fall below a set level.
"The
(European) Commission wants to create a free market, but this will hit
Spain, Portugal and Greece very hard. Our agriculture cannot compete,
with small farms and low yields," Francisco Alvarez, president of
Spanish grain traders' association Accoe said.
In France,
Europe's top grain producer, farmers are estimated to have sown about 4
percent more wheat this winter despite falling prices and rising
stocks. That compares with a provisional estimate for a 7 percent drop
in the United States. "In France we're a bit stuck because we're
the country of wheat," said Emmanuel Jayet, head of agricultural
research at Societe Generale. "Farmers do not have alternatives that
are as profitable on a large scale."
Intervention will
remain for milling wheat, however -- up to a limit of 3 million tonnes
-- and Jayet said this could soften the impact of bearish market
fundamentals for at least a year. "If we fill it (the 3 million tonnes)
that will already provide a sort of cushion. It will absorb most of the
surplus," he said. "The problem could maybe come in the following year,
but we're not there yet."
French and German farmers have begun
to react to market signals by cutting back on barley planting for the
2010/11 market year, after a mountain of the unwanted feedgrain built
up since last summer's harvest.
"This is an impact of the
intervention changes," a spokesman for the German farmers' association
DBV said. German farmers have sent more than 1 million tonnes of barley
in the current 2009/10 market year. Hungarian farmers have
likewise offered wheat and barley into intervention, but cut down on
wheat planting for this summer by about 9 percent.
WEANING
Eastern
European farmers have spent a relatively short time under the
intervention system and expect that will make weaning off price support
easier. "Intervention purchasing was more effective before Poland
joined the EU (in 2004). It shaped grain prices. This (the EU) system
only supports them," said Izabela Dabrowska-Kasiewicz an agricultural
analyst at BGZ Bank.
Grain farmers in southern Europe are
already struggling with prices which they say have fallen so low they
cannot cover costs, and fear they may not be able to compete with big
exporters after reform.
Spanish farmers can only harvest 3
tonnes a hectare from their poor soil even in a good year, while their
northern and eastern European counterparts can reap 8 tonnes or more.
Diego
Pazos, spokesman for Spanish grain importers' association Aecec,
recalled Spain's structural deficit had traditionally bolstered prices
and he doubted they would fall below current intervention levels.
As
an example, French barley has recently been sold at 89 euros a tonne,
ex-store, or well below the intervention price of 103.15 euros
($140.1), but transport costs raise it to 118 euros by the time it
reaches consumers in Spain.
Italian farmers hope to be able to
weather the expected market storm by adding value to their grain by
cashing in on the country's image.
"This is the time to invest
in "Made in Italy" projects and gradually reduce dependence on imports
by valuing, for example, Italian pasta by labelling the origin of the
grain," said Paolo Aballe, grain specialist at farmers group Coldiretti.
(Additional
reporting by Valerie Parent and Gus Trompiz in Paris, Michael Hogan in
Hamburg, Svetlana Kovalyova in Milan, Nigel Hunt in London, Barbara
Sladkowska in Warsaw, Gergely Szakacs in Budapest)martin.roberts@thomsonreuters.com; +34 91 585 2130; Reuters Messaging: martin.roberts1.reuters.com@reuters.net |
