October 4, 2012


EU experiences poor corn crop this summer



EU buyers may be forced to purchase more of the animal feed ingredient on the world market in the coming months, as the EU is facing a poor corn crop this summer, at a time global prices are close to record levels.


"The EU corn crop looks like being smaller than last year, although the harvest is not a disaster it could create a larger import need in the EU at a time of high international corn prices," said Claus Keller, grains specialist with German commodity analysts F.O. Licht.


"The disappointing crop will not provide the EU with major protection against high international prices."


US corn futures reached all-time highs in August after a scorching heat wave ravaged US crops. Corn has fallen in past weeks as the US harvest progressed at a rapid pace but still remains around 35% higher than this time in 2011.


Drought in east Europe caused major cuts in forecast of the harvest of EU corn, a vital animal feed component especially for cattle, pigs and chickens. EU grain lobby Coceral on Friday (Sep 28) cut its estimate for this year's corn harvest by 10 million tonnes to 55.9 million against 64.7 million tonnes last year.


The International Grains Council on Friday cut its forecast of the EU crop by 4.9 million tonnes to 55.0 million tonnes. FO Licht forecasts the 2012 corn crop at 56.7 million tonnes.


"A satisfactory but not bumper crop picture emerging in the west EU will not be enough to compensate for serious crop losses in the east," one trader said.


The corn harvest in top EU producer France is expected to show reasonable yields but results will fall well short of last year's bumper crop after hot, dry weather at the end of the summer hurt non-irrigated corn.


French harvesting is still in its early stages after rain slowed fieldwork. Farm office FranceAgriMer said 2% of the crop had been cut as of September 24, down from 13% a year earlier.


"We will not see anything like the exceptional crop we had last year," said Lucile Brazzini, analyst with French grains consultancy Offre & Demande Agricole (ODA). "The feedback we have had so far is that yields are average."


France's farm ministry estimates the 2012 grain corn crop at 15.2 million tonnes against 15.7 million last year. In the second largest producer Italy, corn harvesting is around 70% complete, with concerns over quality of the crop in parts of the country.


"In the northwest of Italy crop quality is good. In the northeast, there are quality problems," said Mariano Cunietti of Cunietti Cereali.


Harvesting was proceeding a little behind schedule in north western Italy, near the border with France, where around half of the crop was believed to have been collected. Italy's 2012 crop is likely to fall to 8.5 million tonnes from 9.2 million tonnes last year, Coceral forecasts.


Germany's crop is likely to be unchanged on the year at 5.2 million tonnes, while Poland's will rise to 3.6 million tonnes from 2.3 million tonnes, German trader Toepfer International estimates.


"Big problems are emerging in a series of eastern EU countries which traditionally ship large volumes of corn to the west," another trader added.


In big exporter Hungary, the corn crop is forecast by Toepfer to collapse to 4.6 million tonnes from eight million tonnes last year. Romania's crop will plunge to 5.2 million tonnes from 10.4 million tonnes and Bulgaria's to 1.6 million tonnes from two million tonnes, Toepfer estimates.


If the poor crops are confirmed, the EU will face an import need at a period global corn supplies are tight and prices high.


"This could be bad news for livestock farmers who may have to face higher feed costs," Keller said. "The EU does have relatively good corn inventories which I estimate at about 10.8 million tonnes at the end of September 2012. I would expect these to be run down. Compound feed manufacturers are likely to seek to replace corn as much as possible with other grains."


It is not possible to say when EU buyers will enter the world market to purchase imports but new South American corn crops in early 2013 could pressure global prices and so generate more EU buying, Keller said.

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