February 15, 2011

EU wheat tariff lift may spur significant imports

The reductions that the EU is considering for wheat import duties could prompt significant shipments into parts of the region, according to commodity brokerage firm FCStone.

The answer to the question being asked around Europe - of whether a suspension of the E12-a-tonne duty on feed wheat imports and E16-a-tonne levy on barley would provoke sizeable inbound trade - was "potentially yes", said FC Stone analyst Jaime Nolan.

"There is interest in one of the market we have been involved with, in Spain," he told an investor call. Spain, whose hot and dry climate makes for erratic domestic production, is one of the EU's biggest grain import markets.

The EU is expected on February 24 to decide on any tariff move.

While grain prices have risen worldwide, those in Europe have grown particularly fast, inflated by the region's relatively thin export surplus, compared with the US, and its geographical position, making it the natural successor for import demand displaced by Russia's export ban.

Paris wheat has moved from a discount of some EUR5 (US$6.75) a tonne to Chicago wheat before Russia's ban was announced last July to a premium of some EUR40 (US$54.03) a tonne.

However, historical patterns suggested that Paris wheat prices could now enter a period of seasonal decline which has averaged some 15% of the last three years. The fall is widely attributed to the prospect of the next harvest encouraging farmers to sell stocks to free up storage space.