Europe's hog farmers face a "critical time", European Union officials acknowledged in a report which disputes US forecasts of a rise in wheat stocks, and raises "uncertainties" over prospects for dairy prices.

European Commission farm experts, in their first Short Term Outlook briefing on the region's agriculture, warned that pig farm profitability had been "severely affected" by higher feed prices.

Germany's dioxin tainting scandal early in 2011 made an "already difficult market situation" worse.

Farmers will in 2012 lose the support of rising pork exports, set to ease 4.3% after growth of 36% in the last two years, spurred by Chinese and South Korean orders, although Europe's own consumption should improve.

"The pig meat sector is facing a critical time," and had been since autumn last year, the report said.

'Number of uncertainties'

The briefing - which follows warnings from US Department of Agriculture officials of widespread closures in European pig farms - also flagged a "number of uncertainties" for dairy farmers, including global economic growth and the extent of output increases in major producing countries.

While the market had been "favourable", prospects "very much depend on the extent of increased milk production both in the European Union and in the main supplying countries - New Zealand, Australia, the US, etc - and the sustainability of strong demand on the world market".

New Zealand output has been particularly strong in the run up to October, usually the peak production month, with EU and US output seeing a stronger autumn performance than the market had expected.

Stocks to dip 

However, in cereals, EU supplies look set to remain "relatively tight", meaning a "further reduction in stocks can be expected", mainly in barley.

EU wheat inventories at the close of 2011-12 were seen showing a marginal decline to 10.5m tonnes, below a USDA forecast of 13.0m tonnes.

The European Commission said that the report, which will be published three times a year, expressed the views of the authors, rather than any official position.