European useable cereal production set to remain unchanged - EC
In its recently published report Short Term Outlook for arable crop, meat and dairy markets, the Commission said that the area cultivated under cereals, which includes wheat, oats and maize, is forecast to decrease by 1.1% for 2011/12 while useable production will stay at around 275m tonnes.
The report said that in the marketing year 2010/11 useable EU cereal stocks fell sharply by 5.5% as dry and warm weather impacted production in core cereal regions.
The worst forecasted commodity for 2011/12 is for durum, which the EC has said is set for 13% decline in crop production, the worst fall in five years.
The EC has also anticipated that European cereal exports will fall a staggering 31% to just 21.8m tonnes.
Meanwhile imports, which have risen 13.4% in the past five years, are set to rise another 5% for next year.
Analyst’s view
Francisco Redruello, senior foods analyst at Euromonitor said the impact of such figures would be minimal for bakery manufacturers.
“The current tightness in corn supplies might put some upward pressure on their supply chain cost structure in the mid-term. That said hedging strategies in the futures market might substantially reduce such risk. “
“We do not expect any significant effect on bakery retail prices over the next six months, given the current consolidation of retailers and its bargaining power over manufacturers,” he said.
He added that regardless of the Commission’s projections on cereal crop output in Western Europe, global wheat stocks were projected to reach 202m tonnes during the 2011/12 season, according to the International Grains Council’s (IGC) latest forecast (27 October).
“That is almost seven million tonnes up on the previous year. This increase is down to strong production output in key regions like Eastern Europe (Ukraine and Russia) and Australia for the coming season,” he said.
According to Redruello, the relative stabilisation of prices in the last few months was partly due to fierce competition between Ukraine and Russia and US and EU countries.
IGC figures project global corn stocks to remain a tight for the 2011/12 season at 123m tonnes, around eight million tonnes lower than on the previous season.
“Robust demand for corn-based ethanol and strong imports from China and Middle East countries might put some upward pressure on prices. That said, a weak environment in oil futures and strong competition from low-grade wheat is bound to make this rise, if happens, fairly moderate, “said Redruello.
