Grains production in Spain, one of Europe's key import
markets, may fall even further than had been thought thanks to dry weather,
whetting the country's appetite for foreign supplies.
Spain's agriculture ministry sees a 17% drop, to 16.10m
tonnes, in the country's production of grains, minus corn, as the impact of
drought more than offsets the impact of a small rise in sowings.
However, many other observers believe that the increase is
even bigger, given the extent of the dryness which, having delayed autumn
sowings, returned in April to dent yield potential.
"The dry spell and warm temperatures prevailing since
mid-April dried out the soil," US Department of officials in Madrid said.
The drought has, besides accelerating crop development by
one-to-two weeks, "driven down yield expectations.
"The reduction of yields is expected to be significant in
east central Spain," in areas such as Aragon and Castile-La-Mancha, if more
marginal in the north west.
"Industry sources are more pessimistic in their projections"
than the farm ministry, the USDA staff said.
Spanish farm co-operatives have forecast production at
14.81m tonnes, while the Accoe grain merchants' association sees output at
13.77m tonnes – which would represent a fall of nearly 30% year on year.
And doubts concern corn plantings too, with the official
Spanish forecast for a drop of 11,000 hectares to 428,000 hectares also seen by
many as an overestimate.
"Lower margins than expected, and higher irrigation costs
are the two main factors driving the decline given corn's high demand of
'Imports to grow'
The disappointing production prospects look set to increase
Spanish reliance on grain imports, typically at 9m-12m tonnes a year, with the
drought landing a second blow to livestock farmers by reducing pasture
"Overall grain imports are expected to grow compared with
2013-14 to offset the reduction in the domestic supply," the USDA staff said.
However, the prospect of huge imports has been reduced by
relatively large inventories left over from 2013-14, of potentially 1.4m tonnes
for wheat and more than 800,000 tonnes for barley.
Traditional exporters to Spain, such as the UK, also face
the threat of enhanced competition from Ukraine, which has been granted
preferential trade access as part of a drive to support the crisis-hit former
Soviet Union country.
While the introduction zero import duties for some Ukraine
grain exports, up to quota levels, will likely "not have a significant impact"
on Spanish barley imports, they could encourage the substitution of Ukrainian
corn for EU feed wheat.
"Given the current import duty for corn is set at zero,
these duty free quotas might encourage extra-EU wheat imports," the USDA said.
First to gain
Ukraine's Ucab agricultural business association has
forecast a rise of up to 14%, to $4.8bn-5.1bn, in the country's export sales of
agricultural commodities to the EU in 2014, although this will be largely made up
of livestock products.
Ukraine egg and dairy groups are likely to be quick off the
mark to exploit the improved trade terms, as they already "comply with basic EU
standards", Ucab said.
Chicken producers are in the same position, although for
beef and pork exporters, access will be "more complicated… given sophisticated