Maize shortage, wheat surplus

by Teresa Acklin
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Faulty E.U. set-aside policies should be changed to correct imbalances, Cerestar president says.

   The recent increase in the use of wheat for starch production and the effect on maize uptake in the E.U. has largely been brought about by the reforms of the Common Agricultural Policy, according to Silvio Kluzer, president and managing director of Cerestar.

   Mr. Kluzer, who is also chairman of the European Starch Manufacturers' Association, stressed he was not speaking in his official capacity when he told World Grain that the CAP set-aside policy, which treats all cereals the same, was wrong.

   He noted before area cuts were introduced, Europe was roughly in balance in terms of maize supply and demand. But by applying the same level of set-aside to all cereals, maize is now in short supply while wheat production still outstrips demand, he said. As a result, the European Union has imported about 1.5 million tonnes of maize this year and probably will have to import more next year, he said.

   With maize looking more expensive than wheat as a raw material over the long term, Mr. Kluzer said companies making planning decisions on new starch plants therefore were tending to opt for wheat rather than maize. But this might push down wheat gluten prices further, hampering the competitiveness of wheat, he said.

   Meantime, starch manufacturers were continuing to lobby the European Commission to treat cereals for set-aside separately according to their supply/demand status. The problem is a structural one unrelated to the world price situation, he said.

   "There is no reason to cut back production of maize in the E.U. because it is not in surplus," he said.

   Commenting on the concerns raised by U.S. manufacturers about further increases in European production of wheat gluten following the increased use of wheat for starch, Mr. Kluzer said he did not accept assertions that E.U. exports were responsible for the price pressures on wheat gluten in the U.S.

   "In the U.S., the raw material for starch production is maize," he said. "It is very efficient and very cost effective. But wheat costs the U.S. more than (maize) so inevitably wheat starch has problems in competing with (maize) starch. This makes it difficult for U.S. producers to compete in their own market."

   At the same time, U.S. starch manufacturers are suffering from over-production because usage for ethanol has not been as high as had been expected. This has led to moves by U.S. manufacturers to demand changes in the E.U.'s systems of protection and production subsidies.

   Mr. Kluzer said Europe's system of subsidies for the production, use and export of starch and gluten were designed to compensate for the difference between the internal price of cereals and the world price of maize, but the subsidies did not fully compensate for the difference. Despite the rise in world wheat prices, wheat gluten prices are still under pressure, although there are some signs of improvement, he said.

   Mr. Kluzer said the main markets for E.U.-produced wheat gluten were the United Kingdom, Germany and France, while demand was expanding rapidly in Southeast Asia. The E.U., however, will continue to export to the United States, although its share of the market is likely to continue at around 27% of an expanding market, he said.

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