EU grain supply tension may ease next season, but prices to stay high

PARIS: Tight grain supplies in the European Union should be replenished next season by an improved harvest, but prices could remain high as Chinese demand keeps the global surplus limited, French analyst firm Strategie Grains said.

European wheat futures soared this week to seven-year highs as reduced US supply forecasts and Russian plans to curb grain exports fuelled concern about dwindling global availability.

"Despite wheat and maize stocks in Europe returning to more comfortable levels than in 2020/21, we anticipate that prices will remain high," Strategie Grains said in a monthly report.

"For marketing year 2021/22, we forecast that the global inventories of barley and maize will shrink - assuming that China's import requirements remain high."

For soft wheat, production in the EU's 27 countries is expected to rise to 129.7 million tonnes this year, up 9% from last year's weather-hit crop.

The rebound in production should outstrip an expected recovery in EU demand as the coronavirus pandemic eases, allowing the bloc's wheat inventories to expand in 2021/22 from very low levels in the current season, it said.

Maize supplies could also be bolstered if main EU supplier Ukraine recovers from last year's drought-hit harvest, it said.

Global wheat and maize production was also expected to rise next season, but maize and barley stocks could shrink due to strong Chinese imports of animal feed grains, it added.