September 23, 2009

Spain's grain deficit is expected to increase in the coming year after a poor harvest, with analysts and trade groups expecting northern Europe to fill in most of the supply gap.

The Spanish Association of Cereal and Products Importers (Aecec) said Spain's deficit will rise to 13.2 million tonnes in the 2009-10 marketing year from 7.7 million tonnes in the previous year.

Farmers' unions expect a deficit of around 10 million tonnes, but their forecasts are based on lower predictions of animal feed feedback, human consumption, bioethanol and seeds.

Spain's harsh climate, poor soil and lack of arable land meant that the country must import huge amounts of grain despite a bumper year.

This summer, the wheat and barley harvest fell six million tonnes from last year mainly due to an unusually hot and dry weather since April.

Carryover stocks have increased and demand for animal feed from crisis-hit livestock farmers is weak, but not enough to offset the widening supply gap, said traders.

French analyst Strategie Grains estimates that Spain will import more wheat in 2009-10 from within the EU, but less from countries outside such as Ukraine, Spain's favourite wheat supplier in 2008-09.

In 2009-10, Black Sea imports will be subject to quotas for the entire crop year, which did not occur until the second half of the 2008-09 crop year, said SG director Andree Defois.

Spain and other EU countries have been allowed to import 595,000 tonnes of wheat in each of the first three quarters of 2009 under the tariff-rate quotas scheme.

French traders expect sales to Spain to increase to 1.2-1.5 million tonnes from less than one million.

Aecec also expected Spain to buy grain from within Europe, especially as EU exports have become less competitive and North Africa's import needs have shrunk.