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Cereals

General Market Situation 2010

In the European Union, 2010 saw a sharp increase in the price of cereals in line with global markets. This was due in part to adverse weather conditions, lower harvests in the main cereal exporting regions of Canada and Russia and the ban on grain exports imposed by Russia. The EU Commission estimates that total production for the 2010 harvest will be in the region of 277 million tonnes, which represents a 17 million tonne (or 6%) decrease on 2009. Production of common wheat is forecast at 127 million tonnes (a decrease of 2% on 2009). Barley production is estimated at 53 million tonnes (a decrease of 15 %). Maize production is forecast similar to that of 2009 at 57 million tonnes.

On the world market, global grain supplies are expected to tighten in 2010/11 as production of wheat, maize and barley fall short of forecast consumption. As a result global carry-over stocks are expected to fall to their lowest level since 2007/08. The International Grains Council estimates total grain production for the 2010 harvest in the region of 1,726 million tonnes. Wheat production is forecast at 647 million tonnes, while maize production is forecast at 809 million tonnes. World barley production is estimated at 123 million tonnes, 18% down on last year and the lowest production in 40 years mainly due to adverse weather in Canada, Russia and parts of Europe.

Output in Ireland

The CSO advance estimate of output value of cereals in 2010 is €202m, an increase of 89% due to the sharp rise in prices.

Table3.9 

Area, Yield and Production in Ireland

The overall area sown to cereals in Ireland is in the region of 256,000 hectares, down 11% on the area sown in 2009 due to falling prices and higher input costs in the previous two years. Cereal yields were slightly above average mainly due to excellent harvest conditions and good growing conditions during grain fill. Total cereal production is estimated at 1.933 million tonnes, which is almost a 3% decrease on the 2009 harvest. This drop was due to lower acreage sown rather than poor yields. Total production of wheat is 639,000 tonnes which represents a 5% decrease; barley production at 1.149 million tonnes is down by 1.5%, while production of oats decreased 1% to 145,000 tonnes. Good harvest conditions meant that average moisture contents were low.

Table3.10 

Prices

Ireland is a deficit market for cereals and, as such, is greatly affected by world prices and supplies. In line with trends on the world and EU markets, grain prices in Ireland increased significantly in 2010 following two difficult years. The sharp increase in prices took market commentators by surprise. Prices in Ireland have increased on average 89% on this time last year.

Intervention

There is no change to the price of grain sold into intervention in the 2010/2011 marketing year, with the basic buying-in price standing at €101.31 per tonne. The current intervention period runs from 1 November 2010 to 31 May 2011, but no offers have been made so far this marketing year. The Commission have opened a tender for the resale of all intervention stocks of cereal on the internal market.

As a result of the CAP Health Check agreement, a number of changes to the EU intervention regime come into effect from 2010. The intervention mechanism is retained for barley, with a ceiling of zero being fixed. However, the Commission can propose to raise this ceiling in future years, should the market situation so require. For bread-making wheat, a ceiling of 3 million tonnes per intervention period has been introduced, with a tendering system applicable on any volumes above this quantity. The changes apply from the 2010/2011 marketing year, which began on 1st July 2010.

Outlook 2011

At world market level, the International Grain Council forecasts the global wheat area planted in 2011 to rise by 3% to 224 million hectares, boosted by higher prices. Assuming average yields world wheat production is forecast to rise to 670 million tons, up 23 million tonnes on 2010. Sowings of maize and barley crops are forecast to increase also.

In the EU, total grain production is expected to increase for 2011 to 286 million tonnes due to higher prices and increased profitability in the sector. The area planted to wheat, barley and maize is expected to rise, resulting in a 4% increase in total wheat production, with an increase of 3% for barley and maize production.
 
In Ireland, early indications are that sowings of winter cereals have increased 29% on last year, due to renewed optimism in the sector and strong forward prices. Winter wheat is estimated at 75,000 hectares (recent average 59,000ha), winter barley is up from 27,000 hectares to 35,000 hectares. Winter oats is estimated to be 11,000 hectares.