Category: Cereals

EU Cereals Production Rises but Global Situation Remains Tight with Rising Cereals Prices

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Summary
Globally cereals prices have reached multi-year highs, with this threatening to compound national and household food security challenges which have been heightened as a result of the Covid-19 pandemic. While EU soft wheat and maize production is projected to show strong growth in 2021/220 (+7.3% and +8.7% respectively), far exceeding EU consumption growth, the scope for direct EU interventions in support of food deficit ACP countries is limited by the absence of any EU held intervention stocks. EU ending stocks which are at high levels are all held in private hands. Current global cereal sector trends suggest a need for a stronger and more sustained policy focus on developing local and regional supply chains, wherever this is possible. This applied both to direct human consumption and the use of cereals as part of local livestock sector development programmes (e.g., for poultry meat). Such a policy development, however, will require the retention of policy space for the implementation of a supportive trade policy framework.

  • Macro-Economic and Global Trends

According to the EC’s most recent short term agricultural outlook report for the summer of 2021, economic recovery is not only underway, but is ‘stronger than previously forecast.’ This being noted ‘private consumption and foreign demand for EU goods and services decreased in Q1 2021’, although a rebound effect on the demand side is expected from Q3 2021. According to the EC in the EU ‘the impact of the crisis on unemployment is expected to remain contained’ (1).

Despite this more favourable outlook for the EU, ‘uncertainties and economic risks will remain for as long as the health crisis lasts’ (1). It should be noted the duration of the both the direct and indirect impacts of the ongoing health crisis is likely to be far longer in ACP countries than in the EU due to both the uneven rolling out of vaccination campaigns at the global level and the limited resources in ACP countries to support national and household level coping strategies in response to the profound economic disruptions generated by the Covid-19 health crisis.

In terms of the cereals sector, the EC’s analysis highlights how globally ‘prices for the main arable crops have been subject to notable variations in spring, driven by a high demand from China and the US and weather-related uncertainties around global production levels’ (2). According to the EC analysis, at the global level, ‘despite a close-to-record production, the continuous increase of maize global consumption weighed on global stocks which dropped to an 8-year low.’ This is likely to see global ‘grain prices reach multi-year highs’ (1).

This needs to be seen in the context of the other global factors driving up food prices. According to IMF analysis, this needs to be seen against the background of a pre-pandemic trend towards high food prices, which was compounded by ‘early lockdown measures and supply chain disruptions’ which ‘induced a spike in consumer prices’, in part linked to stockpiling of food reserves. This situation has then been compounded by ‘soaring shipping and transport costs’, which ‘have increased around 2-3 times’ since June 2020 (3). Weather related uncertainties arising from dry weather (and subsequently serious floods in some areas) have come on top of these pre-existing trends. The net effect however is to drive up cereal import prices for food deficit developing countries such as many of those in the ACP.

In certain cereals categories where ACP countries have a strong production presence, such as sorghum, rising demand for inputs for animal feed has seen a massive year on year increase in demand globally (+11.4%). To date however, ACP countries have only a marginal presence in the export trade in sorghum to the EU.

  • EU Cereal Market Developments

According to the EC short term agricultural outlook report ‘EU cereals production is expected to reach 288.7 million tonnes’ in 2021/2022, this is an increase of 3.8% in usable production compared to the 2020/21 season (and an increase of 3.4% over the five-year average). This is a result of an increase in production of both soft wheat (+7.3% or + 8,679,000 tonnes), durum wheat (+8.2% or + 594,000 tonnes) and maize (8.7% or + 5,652,000 tonnes) (4). There is thus a significant increase in EU soft wheat and maize availability.

Not surprisingly, both barley and rye production, were down reflecting the reduced demand resulting from the closure of the hospitality sector.

Breakdown of EU-27 cereals gross production (1 000 t)

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22(f) % Change 20/21 to 21/22
Total 289 626 277 371 284 960 271 272 297 015 280 531 291 209 +3.8%
Soft wheat 136,072 120,641 128,306 115,751 132,145 118,101 126,780 +7.3%
Durum wheat 8,389 9,675 8,810 8,767 7,472 7,223 7,817 +8.2%
Rye 7,739 7,349 7,309 6,174 8,156 9,067 8,413 -7.2%
Barley 54,536 53,324 51,642 49,931 55,496 55,155 53,959 -2.7%
Oats 6,783 7 321 7 322 6 887 6 941 8 368 7 827 -6.5%
Maize 59,261 62,963 65,049 69,309 70,410 65,258 70,910 +8.7%
Triticale 12,674 11,785 11,646 9,770 11,200 11,481 11,068 -3.6%
Sorghum 719 688 719 833 1,016 1,191 1,106 -7.1%
Others 3,453 3,625 4,158 3,851 3,880 4,686 3,311 -29.3%

Source: EC, ‘Annexes for EU27‘Short-term outlook for EU agricultural markets in 2021’, Summer 2021,

On the consumption side, EU cereals consumption in 2021/2022 ‘is expected to rebound year on year’ (+1.1%). This increase will be equally shared between increased demand for direct consumption and increased feed demand. This rise in feed demand is occurring despite the projected decline in EU poultry production. This will give rise to an overall increase in EU domestic consumption of only 2.6 million tonnes for the 2021/22 marketing year. This will take EU cereals consumption back to only 0.04% above 2017/18 levels, after two years of declines. This growth in EU consumption demand of 2.6 million tonnes compares to an increase in EU usable production of 10.7 million tonnes, a projected increase in EU exports of 2.9 million tonnes and a projected decline in EU cereals imports of 2.7% or some 600,000 tonnes.

The projected decline in EU cereals imports was to be expected given the increase in projected EU cereals production in 2021/22 (+3.8%), which followed on from the 5.6% decline in EU cereals production in 2020/21 season.

Significantly the EU is no longer holding intervention stocks, which it needs to dispose of. Indeed, the EU has not held any cereals stocks in intervention since 2011, with no serious volumes in intervention stocks since 2009 (when ending stocks in intervention reached 6 million tonnes) (6). All ending stocks of cereals in the EU are currently privately held (4).

EU-27 overall cereal balance (million tonnes)

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22(f) % Change 20/21 to 21/22
EU Beginning stocks 38.4 36.0 31.1 39.8 39.7 42.8 40.8 -4.7%
EU Gross Production 289.6 277.4 285.0 271.3 297.0 280.5 291.2 +3.8%
EU Usable Production 287.1 274.9 282.4 268.9 294.4 278.0 288.7 +3.8%
EU Consumption 259.3 258.8 261.0 261.1 260.3 258.6 261.2 +1.0%
EU Exports 51.4 39.4 35.7 35.9 55.1 41.6 44.5 +7.0%
EU Imports 23.4 20.5 25.0 30.2 25.8 21.9 21.3 -2.7%
EU Ending Stocks° 36.0 31.1 39.8 39.7 42.8 40.8 43.3 +6.1%

° all of which are privately held with EU intervention stocks at zero
Source: EC, ‘Annexes for EU27‘Short-term outlook for EU agricultural markets in 2021’, Summer 2021,

Comment and Analysis
Rising cereals prices and increased logistical costs alongside Covid-19 induced income reductions and the ongoing spread of the pandemic across ACP countries, could lead to a perfect storm of heightened food insecurity at national and household levels, which could persist for many years.Against this background, in the short term, with EU production growth substantially higher than consumption growth, there would appear to be an increase in the availability of EU cereals for use in Covid-19 related food aid relief programmes. However, with cereals stocks available in the EU being in private hands, rather than public intervention storage, there would appear to be limited scope for direct EU administrative interventions to provide food aid to food insecure countries.

This suggests a need for ACP governments to focus, wherever possible, on longer-term solutions involving a sustained policy focus on the development of local and regional cereal and wider agri-food sector supply chains, particularly in sub-Saharan Africa.

For example, while growing international demand for sorghum as an animal feed could potentially hold out market opportunities for ACP producers, these opportunities should not be allowed to divert attention away from the need to develop local animal feed supply chains, as part of national and regional poultry sector development strategies. Sorghum has an equivalent nutritional value to corn as an animal feed, and providing millers are available to produce the appropriate feed mixes can be used as a more environmentally friendly animal feed input in the poultry sector (5). These opportunities need to be fully exploited if longer term food security is to be enhanced and vulnerability to global supply chain disruption reduced.

However, this is also likely to require the granting of greater policy space to ACP governments in deploying trade policy tools, aimed at fostering long term local supply chains. This is likely to require the European Commission to continue to be flexible in how it interprets and applies commitments ACP governments have entered into under economic partnership agreements. This needs to be seen in the context of the creation of the post of Chief Trade Enforcement Officer, whose primary function is to enforce compliance by third countries with the commitments they have entered into with the EU under trade agreements they have signed on to (see companion epamonitoring.net article ‘The Implications of the EUs More Assertive Trade Policy: The EU Trade Policy Review Part 2’, 15 April 2021 and ‘Appointment of Chief Trade Enforcement Officer Could Signal a Push More Rigorous Enforcement of EPA Commitments Made by ACP Governments’, 11 December 2020).

Sources
(1) EC, ‘Short-term outlook for EU agricultural markets in 2021’, Summer 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/short-term-outlook-summer-2021_en.pdf
(2) thedairysite.com, ‘Positive projections for EU agriculture in latest short-term outlook’, 16 July 2021
https://www.thedairysite.com/news/57194/positive-projections-for-eu-agriculture-in-latest-shortterm-outlook/
(3) IMF, ‘Four facts about Soaring Consumer Food Prices’, 24 June 2021
https://blogs.imf.org/2021/06/24/four-facts-about-soaring-consumer-food-prices/

(4) EC, ‘Annexes for EU27‘Short-term outlook for EU agricultural markets in 2021’, Summer 2021,
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/short-term-outlook-statistical-annex_en.pdf
(5) sorghumcheckoff.com, ‘Sorghum in Poultry Production Feeding Guide’
https://www.sorghumcheckoff.com/assets/media/feedingguides/Poultryguideforweb.pdf
(6) EC, ‘Prospects for Agricultural Markets in the EU 2020-2030’, December 2020 – statistics
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/medium-term-outlook-tables_en.pdf
(7) EC, ‘Short-term outlook for EU agricultural markets in 2021- Highlights’, Summer 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/short-term-outlook-summer-2021-highlights_en.pdf

Lack of UK IT Systems for Organic Imports Poses Challenges for ACP Fresh Produce Exporters

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Summary
The UK’s reversion to paper based organic product documentation is generating additional costs and value losses for ACP organic exporters. This takes the form of increased internal administrative costs and value losses resulting from misplaced or delayed documentation.  These problems are particularly severe for small volume exports of mixed organic products. Bulk exports of single organic products are less severely affected, since additional costs are lower and there is less risk of document loss. Political relations between the EU and UK around Brexit related trade issues would appear to be such as to rule out any arrangements which might allow a temporary restoration of UK access to EU IT systems used for trade in organic products until such time as UK systems are fully in place. Read more “Lack of UK IT Systems for Organic Imports Poses Challenges for ACP Fresh Produce Exporters”

Future Caribbean Trade Relations with the UK: Summary of Areas of Concern

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Summary
The new EU/UK rules of origin requirements for the cross-border movement of goods could prove disruptive of certain Caribbean rum, horticulture, sugar and potentially rice supply chains. At the business level this will require a rethinking of routes to markets. At the policy level it will require a sustained engagement to secure a right of automatic cumulation for all Caribbean products enjoying duty-free/quota-free access to both the EU and UK markets, when traded across an EU/UK border.  Only such a policy innovation would remove the rules of origin complications which threatened to make commercially non-viable the current Caribbean exports which are routed via the EU to the UK market or via the UK to EU markets. Read more “Future Caribbean Trade Relations with the UK: Summary of Areas of Concern”

The Link Between EU Agri Food Sector Protectionism and the Value of ACP Trade Preferences Highlighted

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Summary
The WTO has once again highlighted the EU’s extensive use of tariffs and non-tariff measures to manage EU agri-food markets. Preferred ACP exporters benefit from these protectionist EU trade policies, with any movement away from these policies potentially see mainly ACP/LDC exporters losing out to the tune of €1.6 billion.  The prospects of such losses are very real with regard to the UK market, where there is strong pressure under the current MFN tariff review to abandon MFN tariffs where the UK has no or only limited production interests to protect. Looking forward, within the EU, a long standing insistence on abolishing quantitative restrictions on imports from the EU under economic partnership agreements concluded with ACP countries, is being given new impetus with the creation a Chief Trade Enforcement Office, dedicated to making sure existing trade agreement commitments by 3rd countries are fully implemented. Such a course of action however sits uneasily with the EU’s own extensive use of quantitative restrictions in sensitive agri-food sectors. Read more “The Link Between EU Agri Food Sector Protectionism and the Value of ACP Trade Preferences Highlighted”

EU Rice Consumption to Rise Slightly, But What Future Role ACP Suppliers?

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Summary
Despite the strong growth in EU rice consumption and imports in recent years, ACP rice exporters have not benefited from this trend, with EU rice import growth being accounted for by imports from Myanmar and Cambodia, both of which are LDCs. With EU rice consumption and imports stabilizing, the only prospect for increased EU imports of rice from Guyana and Suriname would appear to lie with an extension of existing human rights related sanctions, which have seen certain EBA tariff preferences withdrawn from Cambodia. This would require such measures to be extended both in terms of product scope and geographical coverage to encompass both rice and Myanmar respectively.  The EU currently has no plans to take any such action at the moment, with the response of the Government and Cambodia and Myanmar to ongoing enhanced dialogues on human rights being critical to the future evolution of the EU’s trade and human rights policy. Read more “EU Rice Consumption to Rise Slightly, But What Future Role ACP Suppliers?”

EU FTA Implementation Report Highlights the Importance of Trade Agreements to EU Agro-Food Exports

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Summary
The latest EC FTA implementation report highlighted the particular importance of such agreement to EU agro-food exporters. Attention is increasingly being focused on the removal of non-tariff barriers to EU exporters in the context of the full implementation of agreed tariff reduction commitments. While in 2018 exports to sub-Sahara Africa were an exception to the overall trend in the expansion of the value of EU agro-food exports, the decline in the value of exports to sub-Saharan Africa was less marked in countries where fully implemented FTAs were in place. A review of trends in EU exports of agro-food products where the implementation of an EU FTA had been completed (the EU-South Africa TDCA) revealed that in those products where the margins of tariff preferences generated by the agreement were significant a remarkable growth in the value of EU exports occurred between 2009 and 2016, with in most of these product areas this growth continuing through to 2018 despite South Africa’s economic difficulties (though be it at a slower rate). This illustrates the true value of EU trade agreements to the EU agro-food sector in trade relations with sub-Saharan Africa. Read more “EU FTA Implementation Report Highlights the Importance of Trade Agreements to EU Agro-Food Exports”

Continued Duty Free Quota Free Access to UK Market Secured but the MFN Issue Looms

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Summary
LDCs and all ACP countries who have in place Economic Partnership Agreements with the EU now have in place arrangements which will roll over existing DFQF access to the UK market. However the future value of this rolled over DFQF access will be determined by the MFN tariff regime which the UK government will apply either under a no-deal Brexit or at the end of any agreed transition period in UK/EU trade relations. While the UK  government  announced a ‘development friendly’ temporary no-deal Brexit tariff schedule in March 2019 (with this being slightly revised in October 2019), a full scale review of the UKs temporary MFN tariff schedule is planned from January 2020, with this involving a two month period of public consultations. Following on from this review it is anticipated the UK government will make an announcement on the long term MFN tariffs it plans to apply. It is only at this point that the future value of the rolled over DFQF access granted ACP countries will finally be known. The preferential duty free access rolled over for preferred ACP partner countries adds nothing to the competitive position of ACP exporters if all other competing suppliers also enjoy duty free access as a result of the elimination of MFN duties. Read more “Continued Duty Free Quota Free Access to UK Market Secured but the MFN Issue Looms”

UNCTAD Reviews Impact of Future UK MFN Policy on Low Income Developing Countries

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Summary
The UNCTAD analysis highlights the central importance of future UK MFN tariffs to the value of any ‘rolled over’ ACP preferential access to the UK market. This is an important issue under both a ‘no-deal Brexit and a ‘hard Brexit’. This will require effective ACP lobbying of the UK government to retain in place existing MFN tariffs in areas of greatest interest to ACP exporters. In the country and product analysis undertaken by UNCTAD the importance of triangular trade flows to the UK via the Netherlands is neglected, with this trade also being adversely impacted by any changes in EU MFN tariffs. Read more “UNCTAD Reviews Impact of Future UK MFN Policy on Low Income Developing Countries”

Trends in the EU Rice Market and the Potential Impact of Brexit on ACP Rice Exports

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Summary
While 6 ACP countries export rice to the EU, this trade is wholly dominated by Guyana and Suriname. The unit value of Guyanese and Surinamese rice exports to the EU has fallen 23% and 30% respectively between 2012 and 2017. This needs to be seen in the context of the granting of fully duty free-quota free access to LDC rice exporters from 2009 and the reduction of the EU intervention price for rice and shift over to direct aid payments to EU rice producers in 2013. Despite the price decline Guyana exported 31% more rice to the EU market in 2017 than 2007. Up to 2030 EU rice imports are projected to increase 16.7%, although this does not factor in the withdrawal of the UK from the EU. The UK takes 22.7% of total EU rice imports and 12.4% of rice imports from ACP countries. The UK’s withdrawal would impact on the EU’s TRQ based managed trade regime for rice, since such imports would then be concentrated on EU27 markets. What is more any moves by the UK to abolish current MFN tariffs on rice given the absence of domestic UK production  would greatly intensify competition from Indian and Thai rice exporters, potentially pushing Guyanese and Surinamese rice exporters entirely out of the UK market. Read more “Trends in the EU Rice Market and the Potential Impact of Brexit on ACP Rice Exports”

UK Food Exporters Warn of Dangers of a Rules of Origin Based ‘Hidden Hard Brexit’

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Summary
Rules of origin issues arising from the UK’s withdrawal from the EU could potentially give rise to a ‘hidden hard Brexit’ in the agro-food sector, unless specific new arrangements are set in place. Depending in how EU27/UK rules of origin issues are addressed this could reduce the adverse effects of Brexit on existing ACP exports where processing takes place in the UK prior to onward sale. In addition it could create opportunities for ACP governments to reopen rules of origin issues which have inhibited movement up agro-food sector value chains in trade with the EU. However with these rules of origin issues coming to ahead in March 2019 swift and targeted consultations are needed to identify the specific ‘asks’ which ACP governments should be putting forward to advance the interests of value added food product manufacturers. Read more “UK Food Exporters Warn of Dangers of a Rules of Origin Based ‘Hidden Hard Brexit’”