Floods of EU and eastern grain hit market
IFA warned last week that a major importer was undermining the future viability of the Irish cereal industry and a predicted competitive EU feed wheat market now looks like ensuring that Irish cereal prices will be well controlled.
UK grain traders say that poor harvesting conditions in France and Germany will push more feed wheat onto the intra-European and non-EU export markets.
And huge quantities of grain from the east, which have depressed EU prices in recent years, will still overhang the market.
Wheat exports from the key former Soviet Union suppliers (Russia, Ukraine, and Kazakhstan) are expected to climb this year to their second highest level ever.
Their early season wheat sales from old crop stocks have already been unseasonably strong.
Intervention stocks of Irish grain add to the abundant supply prospects, and usage figures of cereals in feed are expected to be around last year's levels.
However, droughts around the world could strengthen the 2005/2006 grain market for sellers.
In the EU, Spain and Portugal have suffered their worst drought on record.
They have seen their harvests halved, and were already major grain importers in early August.
The EU has agreed to transfer an initial 200,000 tonnes of grain to Portugal and 500,000 tonnes to Spain from intervention stocks, which arose last year mostly in landlocked central Europe.
Just across the Mediterranean, drought in Morocco has knocked 50% off cereal yields, leading to a 33% rise in grain import needs, to near 5m tonnes.
In Algeria, grain yield is expected to slump from last year's 4m tonnes to 2.5m tonnes, with the increased demand likely to filled by exports from France, where farmers have large stocks from last season and also expect a good 2005 harvest.
Meanwhile, EU exporters say an export refund of up to 15 per tonne is needed to make wheat competitive against aggressively priced Russian grain in key markets such as Egypt.
But the Commission is approaching the 2006/2006 grain season cautiously, offering export refunds of only 4 a tonne.
Exporters face competition also from Argentina, but drought is likely to cut production by the South American exporter, and by North America, India, Iran and Turkey.
Nevertheless, it looks like better growing conditions in China and Australia will prevent the world grain market balance from tightening rapidly, and will keep a lid on world prices.
For grain growers in the Irish midlands, the closure in September of the Midland Maltings in Banagher, Co Offaly will be a grim reminder of deteriorating grain market prospects.
The disappearance of this outlet for 45,000 to 50,000 tonnes of barley could potentially destroy the feed market, according to IFA.
