July 7, 2014
Spain''s grain production may drop 30% due to dry weather
Grain production in Spain may decline further due to dry weather, and may lead to a significant demand for foreign supplies.
The country''s agriculture ministry sees a 17% drop in the production of grains (excluding corn) as the impact of drought more than offsets the impact of a small rise in sowings.
However, many observers believe that the increase is even bigger, given the extent of the dry conditions which, having delayed autumn sowings, returned in April to thwart yield potential.
"The dry spell and warm temperatures prevailing since mid-April dried out the soil," said USDA officials in Madrid.
Besides accelerating crop development by one to two weeks, the drought is said to have 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 northwest.
Meanwhile, Spanish farm co-operatives have forecast production at 14.81 million tonnes, while the Accoe grain merchants'' association sees output at 13.77 million tonnes which represents a fall of nearly 30% on-year.
The weak production prospects look set to boost Spain''s reliance on grain imports, typically at 9-12 million tonnes yearly.
"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 1.4 million tonnes for wheat and more than 800,000 tonnes for barley.
Traditional exporters to Spain, such as the UK, also face the threat of rising competition from Ukraine, which has been granted preferential trade access as part of a drive to support the crisis-hit country.
While the introduction of zero import duties for some Ukraine grain exports 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.
Ukraine''s Ucab agricultural business association has forecast a rise of 14%, at US$4.8-5.1 billion, in the country''s export sales of agricultural commodities to the EU in 2014, although this will largely be made up of livestock products.
Ukraine''s egg and dairy groups are likely to capitalise on improved trade terms, as they have 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 inspection procedures".