Grain: World Markets and Trade, August 2003

Grain: World Markets and Trade
Foreign Agricultural Service Circular Series
FG 08-03
August 2003

A drought-induced crop shortfall in the EU, the world’s second largest user of grain for feeding (after the United States), will not only impact domestic consumption patterns but also global grain trade. The smaller wheat harvest will reduce EU exportable supplies to a record low while Russia, Ukraine, and Eastern Europe also have very little exportable supplies. Shrinking EU crops and rising domestic prices have already prompted the Commission to suspend future export tenders indefinitely in order to conserve domestic supplies.

Recent changes in the EU’s import protection mechanism to Tariff Rate Quotas for lower quality wheat and barley, ironically, will now constrain imports of those very grains needed to offset the shortage and help dampen rising prices – already up 10 percent or $10-12 per ton over the past month.

The tightening EU grain supply situation could encourage more domestic feeding of rye, though rye’s use in hog and poultry rations is limited and internal transportation costs are high. Alternatively, feed compounders are already increasingly turning to relatively cheap, imported non-grain feed ingredients such as cassava and corn gluten feed. For its part, the Commission has sold intervention rice for fodder use and has even granted permission for certain regions to graze animals on set-aside land.