October 13, 2007 / 3:04 AM / 12 years ago

ANALYSIS-Europe's farmers to sow wheat on set-aside land

By Nigel Hunt

LONDON, Oct 12 (Reuters) - Wheat is likely to be grown on much of the land returning to agricultural use this year after record prices for the commodity led the European Union to ditch rules keeping land out of production. “I think the main focus will certainly be on using set-aside for wheat production because of the remarkably high wheat prices we have seen in past months,” one German analyst said.

EU agriculture ministers agreed on Sept. 26 to end a rule that farmers leave 10 percent of their land fallow, known as set-aside, in a bid to increase grain supply after shrinking stocks sparked a sharp rise in wheat prices.

The rule was introduced in early 1990s as the EU sought to reduce its grain mountains.

But rising world demand and weather-related crop problems in several key producing countries have seen the stockpiles evaporate and global wheat inventories are now at a 26-year low.

“I think the majority will be wheat, particularly as the announcement came so late. If the EU had decided in June or July it would have given farmers time to be a bit more adventurous,” said Guy Gagen, chief arable adviser for Britain’s National Farmers Union.

Gagen said that in Britain, rapeseed plantings got underway in August, barley in early September and wheat was the last of the country’s three major arable crops to go in the ground from late September.

Wheat futures in Britain rose to a record high in early September with the benchmark November contract LWBX7 rising to a peak of 197.50 pounds ($402.80) a tonne, more than double prices paid as recently as early April.


Britain had around 550,000 hectares in the set-aside scheme. That represents about 11 percent of the total croppable area this year of 4.94 million ha.

Gagen estimated that slightly more than half of the set-aside land would return to agricultural production.

In France, the EU’s agricultural powerhouse, cereal producers also said only part of the country’s set-aside land would probably be used as a result of the new measure.

“If you take the available land in France there is around 1.1 million ha concerned but 404,000 are already grown to make biofuels and 380,000 ha must lie fallow around rivers (due to pesticides),” said Pascal Hurbault, spokesman for wheat producers group AGPB.

That would leave only around 316,000 ha of set-aside land available for growing additional crops although fields that have been left fallow tended to yield less, he said.

Analysts also said farmers had often used their poorest land to fulfil their set-aside quotas.

“This would mean that yields will be substantially lower than normal,” one German analyst said.

“I think that yields of only two-thirds the general level would be achieved on setaside which could mean an additional 1.5 to 2 million tonnes of grain in summer 2008, mainly wheat.”

“For a German grains harvest of between 40 to 50 million tonnes depending on the weather this would certainly be significant in the market,” he added.

In Germany, cultivation of rye, which grows well on poor soil, could also be increased with prices firm this year.

Some farmers expressed concern that the zero set-aside measure only applied to the 2008 coming harvest and that despite talk that it could be renewed nothing was certain.

“To decide to re-seed these fields I need to have the guarantee that it will be for several years,” said Veronique Kemlin, farmer at an experimental livestock and grains (mainly maize) estate in southeast France.

((Additional reporting by Michael Hogan in Hamburg and Sybille de La Hamaide in Paris, editing by Chris Johnson; email: nigel.hunt@reuters.com; RM: nigel.hunt.reuters.com@reuters.net; +44 20 7542 8421))

($1=.4903 Pound) Keywords: GRAINS EUROPE/SETASIDE

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