EU report sees balanced long-term grain market

European Union grain markets will be relatively balanced over 2006-2013 as a modest rise in output is matched by demand growth from the livestock and biofuel industries, the European Commission said in a report on Friday.
Cereal production is expected to rise some 13 million tonnes to 275 million by 2013 and domestic consumption to edge up some 8 million to 255 million tonnes, it said in an updated report on prospects for agricultural markets.
Half of the output increase would come from wheat, seen expanding from 127 million tonnes in 2006 to 134 million tonnes by 2013. Maize will edge up to 53 million tonnes from 49 million tonnes, whereas barley will be more stable at 56 million.
"The relatively stable cereal area and low yield growth should be the main factors contributing to the relatively balanced situation on the cereal markets doe most regions in the EU," said the report.
It predicted cereal demand for bioethanol production increasing by 6.3 million tonnes to reach 8.7 million by 2013, allowing some 3 million tonnes of bioethanol to be produced from cereals by 2013, up from 0.9 million in 2006.
Feed demand for grain is seen showing slight growth, rising from 152 million tonnes now to 154 million in 2013, as increased feeding efficiencies in the new member states will result in slowing the growth in cereals use.
"Moreover, the availability of cheap protein feed from by-products of biodiesel and bioethanol production is likely to change the composition of animal feeds towards more protein-rich feeds at the expense of cereals," the report said.
The report noted higher imports from Southeast Asian countries, which with an assumed strengthening of the dollar against the euro, should allow the EU to expand its share of the world market up to 2013.
EU grain exports were expected to rise from 24 million tonnes to some 30 million over the period, with soft wheat being the major beneficiary. The bloc's cereal stocks were assumed to remain high over the next two years with combined intervention and private stocks in the EU reaching 66 million tonnes by 2007 and then falling to 55.8 million by 2013.
"Most EU regions are expected to show rather favourable conditions with rapidly declining stocks (notably public stocks) thanks to expanding use, lower yield growth and an increasing participation in world markets," it said. "In contrast, market and public stocks would continue to be high in Hungary and Slovakia over the medium term," it added.