November 7, 2012

 

 

EU's final stages of corn harvest are being delayed by rain and a smaller crop is boosting expectations Europe will face higher import needs and prices in the coming months.

 

"I would expect higher prices in coming months because of the smaller EU crops against the background of a general tightness in global corn supplies," said Claus Keller, grains specialist with German commodity analysts F.O. Licht. "Livestock farmers face higher feed costs."

 

EU crop monitoring unit MARS forecasts the 2012 EU corn yield will fall about 21% on-year. French forecaster Strategie Grains estimates the EU crop will fall 20% to 52.8 million tonnes against 66.4 million tonnes last year.

 

"Delays in the final stages of harvesting, especially in France, means we do not yet have a definitive picture, but it looks like the EU crop will be smaller but not a disaster," Keller said. "The main harvest problems are in Italy and east Europe, the crop in west Europe including France and Germany is looking reasonable."

 

Corn is a vital animal feed component especially for cattle, pigs and chickens.

 

In top producer France, harvesting has been delayed by persistent rain. French farm agency FranceAgriMer said harvesting was 69% finished by October 29, behind the 96% cut this time last year.

 

French growers group AGPM said the rain was not a threat to corn quality but the final crop volume remained uncertain with analysts reporting disappointing results while growers kept the average yield at a high level of 9.6-9.7 tonnes per hectare.

 

"We remain confident, the potential remains high," said Gilles Espagnol, corn specialist at French institute Arvalis.

 

This would put France's grain corn crop at 15.6-15.7 million tonnes against 15.1 million tonnes most recently forecast by France's farm ministry. In 2011, France harvested 15.7 million tonnes.

 

In second largest producer Italy, FO Licht estimates the crop will fall to 6.7 million tonnes against 9.3 million tonnes last year. "It is possible Italian and some other south European harvests will turn out slightly higher," said Keller.

 

In Germany the harvest is finishing and yield better than thought, up slightly at 5.23 million tonnes against 5.22 million tonnes last year, German trading house Toepfer estimates.

 

Licht estimates the crop in major exporter Hungary will drop sharply to 4.1 million from 8.0 million tonnes and Romania's will slump to 5.5 million from 10.4 million tonnes.

 

EU corn consumers are likely to turn to imports, will use other feed grains and also run down corn stocks as they face tight global supplies, Keller said. US corn futures reached all-time highs on August 10 after a heat wave ravaged US crops. Corn has fallen about 12% since as US harvest prospects improved but still remain around 24% higher than this time in 2011.

 

EU 2012-13 corn exports are likely to fall to around 1.5 million tonnes from 3.2 million in 2011-12, Keller said. Imports will rise to 6.5 million tonnes in 2012-13 against 6.1 million tonnes in 2011-12, he said.

 

"I think there are large corn inventories in the EU which will be run down," he said. Licht estimates EU corn inventories were 9.5 million tonnes in September 2012 and will be cut to 3.4 million tonnes in September 2013.

 

Traders said they expect South American corn, especially Brazilian and possibly Argentine to benefit from the smaller EU crop. "Brazilian corn is looking very competitive and I would expect large purchases to be made in coming months by European corn producers," one trader said.