EU sees rising wheat sowings into 2030 - downplaying Russian export threat

19.12.2017

European Union farmers will increase sowings of wheat and soybeans into 2030, but cut back on plantings of rapeseed, officials said, in a report which cautioned of a quality threat to Russia’s growth in wheat exports.

The European Commission, in an annual briefing on medium-term agricultural forecasts, estimated that soft wheat seedings will expand from this year’s 23.6m hectares to 24.8m hectares by 2030, despite a continued loss of arable land in the bloc to urbanisation, as well as afforestation.

The expansion - which will drive EU soft wheat output to 160.7m tonnes by 2030, from the 142.5m harvested tonnes this year – will be fuelled by a “moderate” rise in prices, which are “expected to remain… above the long-term average”, reaching E194 a tonne in 13 years’ time.

Average values this year were put at E166 a tonne.

‘Export opportunities’

Prices will be supported by “good feed and export prospects”, the commission said, forecasting growth of 10% in EU cereals demand overall by 2030, compared with the average of the past five years.

Exports prospects for cereals appear particularly strong, said the commission, terming them “positive”, and seeing shipments up 35% in 2030.

Soft wheat exports will soar to 38.4m tonnes in 13 years’ time, compared with the 27.0m tonnes expected by the commission in its latest short-term balance sheet outlook, “with particular opportunities… in the Mediterranean, sub-Saharan Africa and the [Persian] Gulf”.

The upbeat forecast comes despite the growing grip of Russia on world wheat trade, with the country expected this season to extend its lead in world exports, having overtaken the EU in 2016-17.

Russia’s deputy agriculture minister, Sergei Levin, quoted by the RIA news agency on Monday as forecasting shipments to 40m tonnes in 2017-18, although many commentators see exports coming in at about 33m-34m tonnes.

Quality factor

In fact, the commission acknowledged that “Russia, Ukraine and Kazakhstan are expected to continue their recent expansion [in wheat exports], driven by large investments in both production and logistics”.

However, the report added that “quality of grains is a pending issue” for exports from the former Soviet Union, “where production, and thus exports, are mainly of low- to medium-protein rate wheat”.

The EU’s share of world exports will rise from 17% this season to “above 19%” in 2030, helped by “its competitive prices”.

“Traditional wheat producing countries such as the US, Australia and Canada are expected to stabilise their exports,” the report said.

Rapeseed setback

By contrast, rapeseed area will fall from the 6.7m hectares seeded for this year’s harvest to 6.0m hectares in 2030, which would be the lowest since 2006, as demand for rapeseed oil, the key raw material for biodiesel in the EU, is undermined by more efficient engines and some switching to other feedstocks.

In particular, these will be the likes of tallow and cooking oil, which the EU is trying to encourage to reduce pressure from fuel output on land able to grow food crops, although the report acknowledged moves in this direction were being constrained by a dearth of investment.

“Biodiesel production is expected to stabilise around 13.5bn litres until 2020, decreasing slightly afterwards following the drop in diesel demand,” the report said, forecasting biodiesel output dropping back to 12.3bn litres in 2030.

“The demand from the biofuel sector for domestically produced oilseed oils, mainly rapeseed oil, is expected to decrease.”

Rapemeal vs soymeal

Still, overall oilseeds area will remain close to recent averages, supported by growth in soybean sowings to some 1.0m hectares, up from 921,000 hectares this year, and 830,000 hectares last season.

While the rapemeal produced, with rapeseed oil, from crushing rapeseed, has been growing its market share in feedmeals “in the last decade, at the expense of soymeal, the trend is again reversing”, the commission said.

“Nutritional and economic factors hamper the inclusion of more rapemeal in the feed mix.

“The current inclusion of soymeal in feed rations is still relatively low, but it contains essential nutrients such as lysine and other essential proteins.”

‘Income to decrease considerably’

Furthermore, EU soybean growers may gain an extra price premium from the production of non-genetically modified soybeans, given the bloc’s scepticism over the technology.

“An increased wedge between the EU soybean producer price and the world price is also expected as domestic production may be driven by higher domestic demand for non-GM identity-preserved soybeans.”

Still, the briefing was downbeat on prospects for agricultural returns overall, forecasting incomes up just 0.5% by 2030 - representing a tumble of 19.9% once inflation is factored in.

“Factor income in real terms is expected to decrease, mainly due to a stronger increase in intermediate costs compared to the value of production,” the commission said, seeing extra expenses from the likes of machinery and agronomic advice as agriculture “becomes more capital- and service- intensive”.

“Total EU agricultural income is expected to decrease considerably in real terms over the outlook period,” the commission said.

Nonetheless, thanks to lower farm staffing rates “due to continued structural change and the numbers of people leaving agriculture… agricultural income per worker is expected to increase slightly” over the period to 2030, by some 11.9% in real terms.


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