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EU COMMISSION CONFIRMS CEREAL PRICE CRISIS The EU Cereals Management Committee was told, at the end of last August, what everyone else has known since before the summer. Of itself, the EU has not done too badly as regards the 2012


harvest. Despite the drought in a number of Member States, current forecasts for the 2012 cereals harvest are for a total of 279 million tonnes. This, it is true, is two per cent lower than the average for the past five years, but still 25 million tonnes above that for 2007-08 which was, as buyers will remember, a particularly bad year. On the other hand, why use this comparison? As far as wheat is concerned, the EU’s current forecast is


for 127 million tonnes, which is approximately comparable to the average over the past five years. Maize production is currently forecast at 60 million tonnes, two per cent higher than the average of the past five years. In fact, the current balance sheet indicates that the EU-27 will be in a net exporter situation to the tune of around 10 million tonnes, instead of the situation in 2007-08 when the EU’s net imports amounted to around 8 million tonnes. I thought that this assessment indicated a degree of


complacency as regards the situation in 2012-13. In global terms, however, and reflecting the drought conditions in the US during the summer of 2012, the EU has reduced its forecast of world cereal production in 2012-13 compared to that made in July. Observing that, maize prices remained close to record highs during August on the back of tightening world supplies, world carryover stocks are forecast to fall by 33 million tonnes to 338 million tonnes. However, the currently estimated world ratio of stocks to estimated consumption remained at a level comparable to 2011, decreasing only marginally from 20 per cent to 19 per cent. In consequence, prices were likely to remain high with a high level of volatility – there’s that word again. Commenting on these forecasts, the European Commissioner


for Agriculture and Rural development, Dacian Cioloş, said in a statement which struck me as vacuous in the extreme, ‘The recent developments on the agricultural and food markets have demonstrated once again the need for a strong CAP. Over the past weeks, the drought in several regions of the world has led to


PAGE 10 OCTOBER 2012 FEED COMPOUNDER


dramatic price increases for certain commodities, mainly maize and soya which risk destabilizing certain sectors of the European agriculture. This excessive volatility of markets shows clearly that world agriculture requires investments, public management policies and predictability’. What chance for sensible CAP reform with such a lack of direction at the highest levels of the EU Commission.


MILK PRICE INCREASES JUST PR? With all the optimism generated by the introduction of the dairy code of conduct, announced by Jim Paice at the Livestock Show, it was not to be long before the cynics made their voices heard. I am grateful to Food & Drink Europe.com for the


following story. An analyst for Rabobank, an institution whose pronouncements I have come to trust over the years, has recently declared that the milk price increases announced by a number of processors should not be considered ‘a recovery milestone’ but a ‘well-timed PR opportunity’. This followed the announcement by Arla Foods UK and Robert Wiseman that they planned to increase the price they paid to farmers for their milk. Even as I write this, Dairy Crest, whose plants in Derbyshire and Gloucestershire were blockaded by angry farmers in July over prices, followed suite. Dairy Crest, which is supplied by a thousand dairy farmers, will pay 29 pence/litre on contracts for liquid milk from November - an increase of three pence. I also understand, as the result of a very late tip-off, that members of the Cooperative Dairy Group are to receive a penny increase in their milk price which will bring them up to thirty pence a litre payable from the beginning of October. Cooperative Foods’ CEO Steve Murrels said that this was due to the increase in input costs with the approach of autumn, in particular, animal feed prices and what he described as ‘a poor silage crop’ as a result of the unprecedentedly wet summer weather. Going back to Rabobank analyst, Kevin Bellamy, he pointed


out that there was actually more money in the system in that cream prices and, as a result, butter prices had recently risen. Milk was in short supply with the result that product exports were set to slow down with the result that product prices were set to rise. He added that ‘this is a good time for processors to ‘honour


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