A series of weather problems throughout the growing season has left Europe with a sharply reduced grains crop. EU grains exports are set to be well down in 2020-21, with the UK, now out of the EU, but trading as a member until the end of 2020, in particular, set to import an increased quantity of wheat. On the oilseeds side, the question of crisis resilience, in the wake of the coronavirus (COVID-19) pandemic, has thrown a spotlight on the EU’s protein deficit.
Figures from the European grain trade group COCERAL, released on Aug. 24, put the EU-27 plus UK wheat crop in 2020 at 129.1 million tonnes, down from its previous forecast of 129.7 million, which was issued June 8. It compares with the previous year’s crop of 146.8 million tonnes.
“Significant downward revisions in France and the Balkan countries are not completely offset by upward revisions in Poland, the Baltic countries, and Scandinavia,” COCERAL said.
France’s total crop of wheat in 2020 is now forecast at 29.704 million tonnes, down from 39.542 million in 2019.
Year-on-year, another big loser is the UK, which, according to COCERAL, will see its crop fall to 10.003 million tonnes from 16.278 million tonnes in 2019.
The result is set to be a big fall in EU exports of grain during 2020-21, with the International Grains Council, in its Grain Market Report of July 23, putting shipments out of the EU at 35.9 million tonnes, compared with 49.8 million in 2019-20.
A joint statement by France Agri Mer, Arvalis and Terres Inovia, issued on Aug. 6, explained that the problems for France’s grain crop started early with abundant and frequent autumn rain, which made sowing difficult or even impossible. French farmers ended up with sowing dates spread out to an unprecedented extent, which meant big variations in crop development. The area of soft wheat was down 13% as of Aug. 1, and that of barley was down by 7%.
Drought hit the French crop in the spring, with varying consequences, according to the condition of the plants and the soil. The dry weather did have the positive effect of reducing disease pressure and harvesting largely took place in good conditions, France Agri Mer said.
German forecast below average
Germany’s farm union, Deutscher Bauernverband, issued its own crop forecast on Aug. 18, putting grains output at 42.4 million tonnes, or 5% under the 2015-19 average. It pointed out that the country had seen the third year of extreme weather.
For winter wheat, the most important arable crop on German farms, the union reported a drastic fall in area of almost 300,000 hectares to 2.8 million, with the harvest reaching 21.1 million tonnes, compared with 22.8 million the year before.
On the demand side, the European Commission’s Directorate-General for Agriculture and Rural Development (DG AGRI) is expecting to see a rebound in 2020-21.
“With human consumption of staple food (including cereals) less elastic than for other food, the COVID-19 crisis is not expected to have a long-lasting impact on overall demand for cereals for food use,” the DG’s Analysis and Outlook Unit said in the summer edition of its “Short-Term Outlook for EU Agricultural Markets in 2020” report, published July 6.
Lower 2020-21 production is projected “despite good prospects in southern EU,” the report said. “Winter crops (wheat, rapeseed) area was negatively impacted by the difficult sowing conditions and crop development was hampered by the dry and warm spring in several parts of the EU.
“For 2020-21, total use of cereals for feed is expected to decline slightly at 162.6 million tonnes (-0.2% year-on-year), mainly due to a slight decrease of production in the animal sector following the COVID-19 outbreak.”
Smallest crop in 40 years
In Britain, the smallest wheat crop for 40 years made ripples in the mainstream media, with the Murdoch-owned Sky News proclaiming that “worst UK wheat harvest in 40 years prompts flour price hike fears.”
“Brexit, the coronavirus pandemic and small, low-quality crops have created a ‘triple whammy’ for farmers, millers and bakers,” Sky News said in an Aug. 23 report.
The British Broadcasting Corp. (BBC) came out with “bread price may rise after dire UK wheat harvest,” on Aug. 26.
“Farmers say that the extreme weather over the last year is likely to mean wheat yields are down by up to 40%,” the BBC said. “As a result, some millers have already increased the price of flour by 10% and they warn a no-deal Brexit could push up prices even further.”
In a commentary of Aug. 26, David Eudall, head of Market Specialists (Arable), at the UK’s Agriculture and Horticulture Development Board, put the rise in the price of wheat in context.
“The price of wheat does not translate directly and proportionately to the price of bread,” he said. “Wheat prices have a much more direct and pronounced impact on flour, but the subsequent bakery production processes, ingredients, packaging, marketing and transportation mean that wheat isn’t directly related to the price of bread.
“We estimate that the value of wheat in an 800-gram loaf of bread stands at only 11%. With a small harvest and increased imports, our domestic milling wheat prices have been moved higher. However, the price of a loaf on the shelf will be far more influenced by the need for supermarkets to keep consistent prices for consumers amid the record-breaking recession we face (and possible deflation).”
Bread prices have actually fallen during 2020.
Alex Waugh, director general of the National Association of British and Irish Millers (nabim), the industry’s trade body in the UK and the Republic of Ireland, explained, in response to questions from World Grain, that “as a result of the smaller UK wheat crop, likely to be down by around 35% compared to last year, we are expecting to import more wheat for breadmaking.”
“The exact amount will depend on the quality of the UK harvest, which is not yet complete, but we expect imports to be at least double the normal level,” he said.
Nabim is not expecting significant changes to trade flows in global terms. Waugh explained that “the UK will be a net importer rather than an exporter, and shipments from France may reduce.”
“While these are important on a local level, the differences will be easily made up from stocks and good crops in other exporting countries,” he said. “When there is a supply deficit in the UK, millers here traditionally turn to Germany and the Baltic states for supplies. This year is unlikely to be different.
“However, the normal pattern of supply could be distorted if the UK and the EU fail to reach a trade agreement in 2020, with import duties of £79 (US$105) per tonne being applied on grain traded from one to the other after Jan. 1, 2021. If this looks likely, or even possible, it will result in grain being moved before the deadline and put into a buffer stock in order to delay the impact. This will add substantial extra cost, and come with logistics issues, but will still be less expensive than paying the full tariff.”
Less change for oilseeds
According to COCERAL, there’s been less change for rapeseed, with an EU-28 plus UK figure of 17 million tonnes for the 2020 crop, revised up from its earlier estimate of 16.5 million on better-than-expected yields in Germany, Poland and the Baltic countries. The previous year’s crop was 16.9 million tonnes.
COCERAL does foresee a sharp fall in UK rapeseed production putting it at 1.069 million tonnes in 2020 against 1.668 million the year before. Yield is down, but the main factor is a sharp reduction in area.
USDA Foreign Agricultural Service offices in Europe commented on the oilseeds market in an attaché report of Aug. 27. Putting the overall reduction in output at 1.5%, they said that “EU oilseeds production in MY 2020-21 is characterized by the lowest rapeseed production in more than a decade.”
“The somewhat better rapeseed yields compared to the previous year cannot make up for the losses in acreage,” the FAS offices added. “The ban on neonicotinoids makes rapeseed production more difficult, costly, and therefore less attractive. As a result, the EU rapeseed market continues to be very tight and record imports are needed to meet the demand.”
Noting that “the EU is the world’s second largest importer of soybeans after China,” they said that “in MY 2020-21, EU imports of soybeans and crush are expected to slightly increase compared to the previous year, driven by higher demand in the Netherlands and Spain.”
The EU’s protein deficit remains a big issue for the Union’s politicians. Farm ministers met for an informal meeting in Koblenz, in the west of Germany on Aug. 30-Sept. 1. Many around the table, including the host, German Agriculture Minister Julia Klöckner and her French counterpart Julien Denormandie, who called for aid to encourage farmers to increase protein crop production, raised the issue in a discussion of the crisis resilience of the EU’s food and farming sector, in the light of the COVID-19 pandemic, Hungary’s István Nagy wanted to “decrease the EU’s dependence on protein imports from third countries and to incentivize the production of GMO-free feed.”
Chris Lyddon is World Grain’s European correspondent. He may be contacted at: email@example.com.