EU to suspend grain limits to boost cereals
Thursday, 20 September 2007
Andrew Bounds in Brussels and Javier Blas in Vienna
EUROPE reacted to soaring cereal prices lately by seeking to boost output through scrapping limits on grain production imposed 15 years ago.
The European Commission said it would suspend for at least a year a rule requiring farmers to set aside 10 per cent of their land. Agriculture ministers from the 27-member bloc and the European parliament should approve the move by the end of the month.
The Commission said it would add between 10m and 17m tonnes to the harvest, which was 266m tonnes in 2006.
Mariann Fischer Boel, the farm commissioner, said: "Cereal prices have hit historically high levels as the supply situation has grown increasingly tight. A poor 2008 harvest combined with 10 per cent set-aside would expose the internal market to potentially serious risks."
Set-aside was made compulsory in 1992 to tackle Europe's cereal mountain, but that has all but disappeared. Global wheat stocks will fall this year to the lowest level in 26 years, according to the US Department of Agriculture.
Traders said the Commission's projection was hopeful since much unused land was of poor quality and had been left untended for years. Mehdi Chaouky, an analyst at Diapason, the commodities hedge fund, in London, said: "The set-aside land quality is usually very poor so production from there would be small."
In addition, the proposed change could arrive too late for the next wheat planting season, which starts in some European countries in October, traders said.
They said farmers could choose to grow rapeseed or corn for the biofuel industry instead. Ms Fischer Boel's spokesman admitted Brussels had little control over whether and how growers would use the land. "We don't dictate to farmers what they plant."
Poor weather and rampant world demand have driven prices of some crops to record levels. Wheat prices rose 78 per cent year-on-year in August and maize prices rose 50 per cent, the Commission said, though French milling wheat dropped lately, with the benchmark November futures contract falling 3.1 per cent to €268 ($372, £183) a tonne.
The increases have become a hot political issue. Italy has already witnessed protests over high pasta prices, and the French have complained at the cost of a baguette.
The Commission believes not all rises are justified. Wheat comprises only 4.0 per cent of the cost of a loaf of bread, it said.
World cereals output is forecast at 1.65bn tonnes in 2007, according to the International Grains Council.
The US may follow Europe's lead as calls grow for land under a conservation reserve programme to be brought back into use. Russia is considering an export ban to keep domestic consumers supplied.
..............................
Under syndication
arrangement with FE
EUROPE reacted to soaring cereal prices lately by seeking to boost output through scrapping limits on grain production imposed 15 years ago.
The European Commission said it would suspend for at least a year a rule requiring farmers to set aside 10 per cent of their land. Agriculture ministers from the 27-member bloc and the European parliament should approve the move by the end of the month.
The Commission said it would add between 10m and 17m tonnes to the harvest, which was 266m tonnes in 2006.
Mariann Fischer Boel, the farm commissioner, said: "Cereal prices have hit historically high levels as the supply situation has grown increasingly tight. A poor 2008 harvest combined with 10 per cent set-aside would expose the internal market to potentially serious risks."
Set-aside was made compulsory in 1992 to tackle Europe's cereal mountain, but that has all but disappeared. Global wheat stocks will fall this year to the lowest level in 26 years, according to the US Department of Agriculture.
Traders said the Commission's projection was hopeful since much unused land was of poor quality and had been left untended for years. Mehdi Chaouky, an analyst at Diapason, the commodities hedge fund, in London, said: "The set-aside land quality is usually very poor so production from there would be small."
In addition, the proposed change could arrive too late for the next wheat planting season, which starts in some European countries in October, traders said.
They said farmers could choose to grow rapeseed or corn for the biofuel industry instead. Ms Fischer Boel's spokesman admitted Brussels had little control over whether and how growers would use the land. "We don't dictate to farmers what they plant."
Poor weather and rampant world demand have driven prices of some crops to record levels. Wheat prices rose 78 per cent year-on-year in August and maize prices rose 50 per cent, the Commission said, though French milling wheat dropped lately, with the benchmark November futures contract falling 3.1 per cent to €268 ($372, £183) a tonne.
The increases have become a hot political issue. Italy has already witnessed protests over high pasta prices, and the French have complained at the cost of a baguette.
The Commission believes not all rises are justified. Wheat comprises only 4.0 per cent of the cost of a loaf of bread, it said.
World cereals output is forecast at 1.65bn tonnes in 2007, according to the International Grains Council.
The US may follow Europe's lead as calls grow for land under a conservation reserve programme to be brought back into use. Russia is considering an export ban to keep domestic consumers supplied.
..............................
Under syndication
arrangement with FE