August 16, 2012 / 2:25 PM / 7 years ago

Drought slashes EU maize crop, adds to global squeeze: analyst

PARIS (Reuters) - Hot, dry weather in eastern and southern European Union countries has severely hit prospects for this year’s EU maize harvest, adding pressure to a world market already reeling from huge drought damage in the United States, a grain analyst said.

French-based Strategie Grains also said that even an improved outlook for the EU’s wheat harvest would provide little relief to grain supply as this would be swallowed up by export demand and a shift in livestock feed away from scarce maize.

Grain markets have been shaken in the past two months by the worst drought in more than 50 years in the United States, which has ravaged crops in the world’s biggest maize (corn) producer and sent prices to all-time highs.

Weather tensions in grain markets have raised the spectre of a global food crisis such as the one in 2008, when surging prices of staple crops provoked rioting in some countries, and has prompted G20 nations to mull an emergency meeting and led to calls for the U.S. to cut maize use in biofuels.

In its closely watched monthly crop report on Thursday, Strategie Grains lowered its outlook for EU grain maize production this year by 7.1 million tonnes to 58.1 million, down 13 percent on last year’s bumper crop.

“Maize development has been severely impacted by the hot, dry weather in central and southern Europe,” the French-based analyst said. “The damage is irreversible, although an improvement in the weather would provide better conditions for filling the grains that exist.”

The adverse weather led the analyst to cut its output forecasts for Hungary, Italy and Romania - three of the biggest maize producers in the EU - by 2 million tonnes each and to reduce its outlook for Greece, the Czech Republic, Slovakia and Bulgaria by a combined 1.1 million tonnes.

The losses were offset to a small extent by a combined upward revision of 680,000 tonnes for France and Spain, reflecting better yield prospects and increased area, respectively, Strategie Grains said.

Taking account of drought in the U.S., Europe’s Balkan region and Black Sea countries, the analyst said it had lowered its forecast of world maize production in 2012/13 by nearly 70 million tonnes to 829.1 million tonnes.

This compares with the 56 million tonne cut made by the U.S. Department of Agriculture this month to its world corn estimate, including a near 4 million tonne cut to EU output to 61.5 million.


To reflect reduced availability and rising prices, the analyst lowered by 6.6 million tonnes its forecast of maize use in animal feed in the EU in 2012/13, adding that low global supply will maintain pressure to limit demand via high prices.

“Despite having risen sharply during the last two months, maize prices have a further significant potential to increase.”

In contrast to maize, production prospects for soft wheat, the EU’s main cereal crop, have improved since last month due to more promising yields in France, Germany and Poland, it said.

The analyst raised its forecast of this year’s EU soft wheat crop by 1.7 million tonnes to 125.3 million tonnes, which would be down 3 percent on the 2011 harvest.

Projected output in France, the EU’s top wheat producer and exporter, was raised by 1.6 million tonnes, and the estimate for Germany and Poland was increased by a combined 1.5 million tonnes.

Persistent rain, which had delayed harvesting in France and Germany, was continuing to affect the UK and Ireland, for which Strategie Grains cut wheat output by a combined 1.1 million tonnes.

But potential export demand given high U.S. prices and low Black Sea availability, and extra animal-feed demand as wheat grew competitive against maize will still tighten wheat stocks.

“The outlook for world wheat market is therefore bullish in the medium term and this should cause prices across all markets to rise, especially EU prices,” Strategie Grains said.

Regarding wheat quality, which determines suitability for flour-making, crops in central and southeast Europe were showing good protein content, whereas in France and Germany improved yields were expected to lead to a fall in protein from last year, it said, adding there were quality concerns in Britain.

In barley, the EU is likely to produce a crop of 53.1 million tonnes, up 600,000 tonnes from the analyst’s previous estimate, mainly due to a combined 630,000 tonne increase for the German, Polish and Danish harvests, it said.

EU barley supply may also tighten this season due to lower crops in the Black Sea region and tensions in maize and wheat markets, Strategie Grains said, adding however that supply of malting barley, used for beer ingredient malt, remained ample.

Editing by Jane Baird and Keiron Henderson

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