September 10, 2007 

 

EU to consider new grain trade policies on high feed costs

 

 

The feed and food industry in European Union is seen to reconsider new approach on grain trade policies and import restrictions on genetically-modified traits to ease impact on soaring feed prices.

 

However, the decision will hinge on political resolutions and production policies to stop soaring prices, which are at historical high levels, according to officials and traders.

 

A source close to the European Commission said the implementation may take some time as "the Commission are weak, very weak". In the range of instruments available, "there is no system to prevent that the prices go up above a certain level", he said.

 

Different to earlier price hikes is that now there are no stocks at EU level that can be sold on the market to ease demand and thus keep prices more stable. To increase taxes on exports as was done in 1996/97 is not an issue in the EU. According to Michael Mann, EY Commission spokesman, putting a tax on export is not the Commission's intention but rather act on "produced volumes".

 

For harvesting year 2008, the EU foresees to remove the obligation of 10 percent fallow land (set-aside policy), which should increase the arable land area with almost 4 million hectares. Sown with cereals this area could supply 10 to 17 million tonnes of cereals, according to the Commission forecast.

 

Analysts say the Council of Ministers of Agriculture should adopt the measure at the end of October and make it permanent within the framework of the "health check" of the Common Agricultural Policy(CAP), envisaged in 2008. Such a measure would not come into full existence next year since October is already late for sowing winter wheat crops. Apart from this, some technical constraints need to be addressed to start re-using fallow land.

 

Adverse weather in the southeast of the EU doubled prices of European wheat in the last five months reaching an absolute record of 300 euros/tonne this week.

 

At the same time American wheat pulverized its old price record of 1996, exceeding US$8 per bushel in Chicago, under the pressure of a strong international demand. It would thus be necessary to consider lowering the fixed EU importation tariff of 12 euros/ton for a quota of almost 3 million tonnes of wheat. This option is foreseen in the regulation. "Legally yes, it is possible", confirmed the source close to the Commission. "But it would be extremely difficult to reinstall the rule when necessary in the future."

 

These import tariffs were installed in 2003 to limit competition of cheap cereals from countries around the Black Sea. The import quota for cereals with fixed right was agreed upon with the World Trade Organization to compensate for the entry in the Union in 2004 of the 10 new central European countries.

 

The liberalisation of GMO-corn imports would also be other possibility as what many animal feed traders have been requesting for a time now. GMO-corn is abundantly available in the world but entry in the Union remains limited to only a few varieties and with restrictive tolerance levels, because of the strong opposition of some EU-countries. A trader said to balance the European corn market the import of 8 to 10 million tonnes of corn is necessary, which Brazil cannot all alone provide.