EU Forecasts Lower Grain Supply as Dry Weather Damages Crop

The European Union’s grain output may be about 2 percent smaller than average because of dry weather in some regions, the European Commission said.

Total cereal production may be 279 million metric tons, according to an e-mailed report today from the commission, the EU’s executive arm. The soft wheat harvest may be 127 million tons, which is “status quo” compared with the previous five-year average, and corn output of 60 million tons is about 2 percent higher than average, it said. The bloc may be a net grain exporter this season, according to the report.

World inventories of grain at the end of the season may decline by 33 million tons to 338 million tons, the EU said. The tightening supply, due in part to drought in the U.S., “is likely to keep prices at high levels,” according to the report. Corn touched a record $8.49 a bushel on Aug. 10 on the Chicago Board of Trade, while milling-wheat futures have climbed 35 percent this year on NYSE Liffe in Paris.

Higher prices “risk destabilizing certain sectors of the European agriculture,” Dacian Ciolos, EU agriculture commissioner, said in the statement. “This excessive volatility of markets shows clearly that world agriculture requires investments, public management policies and predictability.”

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