The European Union will be compelled to retain its growing mountain of 4.2 million tonnes of unwanted grain as no disposal outlets are feasible in an era when subsidized sales on world markets are no option, analysts said March 19.
This may mean the EU faces a storage bill of up to 74 million euros ($100.7 million) annually if the grain mountain grows to forecast levels, they said.
Selling the current grain mountain in the EU’s internal market could further depress prices as the bloc will cut its safety net of minimum guaranteed prices for grain farmers this summer, allowing lower grain prices than in the past.
“There is no easy, single method of selling this grain, there is just too much,” said Claus Keller of German commodity analysts F. O. Licht.
The EU supports farmers by guaranteeing to buy crops, including grain, at a minimum price in its intervention scheme. Unwanted cereals are stored in intervention stocks, its grain mountain, while the bloc seeks methods of selling them.
EU farmers have already offered 4.2 million tonnes of grain, mostly animal feed barley, into intervention this season, and this could rise to six million to seven million tonnes as farmers take the last chance for intervention subsidies before big subsidy cuts this summer, traders said.
The EU has rejected a call from Finland for renewed export subsidies to cut the expanding stocks, and analysts rule out export subsidies in the current global trade scene.
A senior EU official also indicated the bloc may hold the stocks.
“I think these surplus stocks in the feed sector may simply be retained,” Keller said. “It may be possible to gradually reduce the stocks over a long period, but there is no easy option to sell them in a short period of time.”
Emmanuel Jayet, head of agricultural commodities research at France’s Societe Generale, agreed, expecting sales to be spread over several years.
The EU may move stocks around Europe to cope with lack of storage capacity in some countries such as the recent transfer of Finnish barley to Estonia, Jayet said.
Brussels faces an annual storage bill of about 49 million euros for the current four million tonnes of grain stocks.
If stocks rise to the expected six million tonnes the annual bill would rise to about 74 million euros, he said.