March 18, 2011

 

Spain's grain inventories at low levels 

 

 

Grain supplies in Spain are unusually low and the country will need a wave of imports to meet demand until domestic new crop is available in July, according to a trade spokesman.

 

Francisco Alvarez, president of Spanish grain merchants' association ACCOE, estimated warehouses across Spain currently held less than the 1.5-2 million tonnes left over from the previous 2009-10 market year.

 

"We're in March, there are still many months left. I see merchandise coming from the EU because here we don't have enough to tide us over to the harvest," Alvarez said on the sidelines of an annual grain traders' gathering held by ACCOE.

 

"I think EU exporters will also have to lower prices because they have been too high to compete here," he added.

 

Spain needs to import at least 10 million tonnes of cereal a year because farmers can never grow enough to meet demand in the country's poor soil and harsh climate.

 

Port sources say quayside silos hold enough for about two months' demand from clients, mainly in Spain's animal feed industry, Europe's biggest.

 

Alvarez said the EU's removal of automatic intervention last year to support prices had led to extreme market volatility, which hurt livestock farmers and merchants.

 

"Prices were so low farmers were not encouraged to sow, so when supply tightened we had the shortfalls we have seen and prices shot up," he said.

 

Farmers decided to plant less for last summer's harvest when wheat and barley farm-gate prices dipped to EUR120 (US$169) per tonne.

 

Prices are now EUR217 (US$305) and EUR237/tonne (US$333) <GRAES01> after a broad-based grains rally triggered by a poor harvest in Russia last year, but that is beyond the reach of livestock farmers facing a slump in meat prices.

 

Lack of credit for farmers added to merchants' problems, Alvarez said.

 

"We are very concerned about payments. Contracts expire which livestock farmers cannot pay, and they pass that down the food chain to us," he said. "We are financing clients the banks don't want to finance."

 

Alvarez estimated EUR160 (US$225) per tonne was a reasonable minimum grain price to encourage farmers to plant enough to prevent excessive shortages.

 

"But neither should prices surpass EUR180 (US$253). That would be logical and reasonable. Anything above or below would be extreme and that is never good," he said.

 

"What the EU calls a free market I call a lawless market, where the strong prey on the weak. In our case, big retail pays what and when it likes, and livestock farmers suffer the consequences," he said.