In its report, ‘Prospects for agricultural markets and income in the EU 2012–2020’ published in December 2012, the EC notes that in 2011, EU cereals production reached 285.7 million tonnes due to favourable yields, particularly for maize (+8.9%). In 2012, EU cereals production figures are expected to be 3% lower (276.3 million tonnes), with a sharp decline of 15.5% in maize production. Subject to weather-related variation, EU cereals production is projected to grow steadily from 2011 to 2022 (+7.1%), but with stronger than average growth in maize production (10.4%). EU cereals consumption is projected to increase by 8%, although when the expansion of cereals use in bioenergy production is excluded, this falls to only 4%.
For marketing year (MY) 2012/13 imports are expected to be lower than in MY 2011/12, as a result of reduced demand for animal feed, following price increases. Up till 2022, imports are projected to fluctuate between 11.5 and 15.2 million tonnes, but with roughly the same level of imports in 2022 as in 2011. Wheat imports are projected to be significantly lower than in 2011 throughout the period, but roughly around the same level as the average for 2009–11.
Similarly, total EU cereals exports are projected to fluctuate between 21.6 and 26.5 million tonnes, with exports from 2016 consistently lower than in 2011. Wheat exports are projected to be consistently higher than 2011 levels throughout the period, but well below the high levels of wheat exports experienced in the 2009–10 period.
According to the EC, “the combination of a slightly lower crop production and stagnant demand is expected to keep the cereal balance tight, with stocks declining leading to a stock-to-use ratio of 12%.” In the face of low stock levels, the report projects prices above the average of the last decade, with increased price volatility.
Demand for feed “currently accounts for 80% of EU maize usage”. By 2022, this is projected to fall to 76.6%, as maize use in bioenergy production increases by over 167%. This is in part linked to the assumption that there will be a dramatic increase in the biofuel use of cereals. In this context it should be noted that the EC projections do not factor in the possible effects of the Commission’s proposals of October 2012 to modify the sustainability criteria applicable under the renewable energy directive (RED). Endorsement of these EC proposals, which require fully half of new renewable energy to be derived from non-food feedstock, would reduce demand projections.
Excluding any changes to the RED, the EC argues that while the EU will remain a net importer of cereals, this gap will narrow.
Cereals: EU production, consumption, exports and ending stocks 2009–22 (million tonnes)
|Production||Imports||Exports||Total consumption||Bioenergy consumption||Ending stocks|
Source: EC, ‘Prospects for agricultural markets…’, December 2012, Table 7.1, ‘Total cereals balance sheet in the EU, 2009–2022'
The EC’s assumption of a tight market situation assumes a 167% increase of maize used in bioenergy production. However, if EC proposals to modify the sustainability criteria applied under the RED are adopted, then this would slow down the rate of expansion of demand and increase either EU exports of maize (tripling exports, depending on market opportunities and exchange rate movements) or EU ending stocks (by up to one-third for maize and 13% for overall cereals stocks).
The future of EU biofuels policy is thus a major area of uncertainty as regards future EU cereals sector projections. It can, however, be assumed that any reduced demand for cereals for biofuel production would be likely to make the EU an even larger net cereals exporter than is currently projected.
However, the net effect of any EU changes in biofuels policy on global markets is likely to be far less significant than policy changes in the US, given the relatively lower usage of cereals in biofuel production in the EU, compared to the US.