11/02/2011

The European Union is in the process of drafting a proposal to suspend import duties on feed wheat and barley to combat the skyrocketing prices of agricultural commodities.

The proposal was raised at a Cereals Management Committee meeting. The committee, part of the European Commission’s agriculture committee, advised allowing additional sugar imports at lower tariffs as well as the moves on feed wheat and barley duties. Though the proposals are currently in draft form and will be subject to a vote at a forthcoming committee meeting, expected to be 24 Febrary, if passed they would see cuts of 12 €/tonne on feed wheat and 16 €/tonne on feed barley lasting until June 30, 2011.

In a statement, the Commission said, "This is a reaction on the tight supplies on world cereals markets, and the idea of the proposal is to help facilitate feed cereals imports from outside the EU and so to reduce tensions on the European markets."

Import tariffs exist in the European Union in order to support agricultural commodity prices for the region’s farmers. Prices of feed grains have been rising sharply in the European market as high demand from the Middle East and North Africa is draining the region’s stocks, while a Russian export ban, fears caused by a 3 month drought in China’s wheat growing regions and a harsh winter in the USA and Australia have all affected supply.

EU soft wheat exports since July are 20% higher than the same period last year, while barley exports are almost seven times higher. The price of the benchmark European feed wheat contract in London has risen 110% since June, on Thursday (10 Feb) it was trading at £210.50 a tonne, its highest level since 2008’s food crisis.

Until now, the the move has been rejected, as executives feel it would have little effect on prices throughout the 27 nations. However, during the 2008 food crisis the EU did suspend most of its grain import tariffs in response to tight supplies and soaring world prices.

In Paris, the Price of milling wheat is also drastically high; traders expect it will surpass its record of €300 a tonne, while French feed barley prices are up 130% since June. The reduced import tarrifs on sugar come after a shortage in Portugal led to panic buying in December. However, there are fears that, if passed, the plans could add to upward pressures on international food prices as analysts say an additional 300,000 tonnes of sugar being imported into Europe could squeeze the market, where prices are already at their highest in 30 years.