The European Commission has once again reduced its forecast for EU crop production, sending ripples through the agricultural markets. This latest revision comes despite other agencies recently lowering their harvest expectations as well. As a result, the Paris stock market, which hit record lows earlier this week, found some support amid the declining production outlook.
EU Cereal Production Forecast Falls Further
According to the European Commission’s latest forecast, cereal production in the EU for the 2024/25 marketing year is expected to drop to 264.5 million tons, down from 269.9 million tons in the previous season. This significant decrease includes a sharp cut in soft wheat production, which is projected to fall to a four-year low of 116.1 million tons. This is a substantial decline from the 125 million tons produced last year and even lower than the earlier forecast of 120.8 million tons.
Soft Wheat Export Outlook Dims
The European Commission has also reduced its forecast for soft wheat exports from the EU in the 2024/25 fiscal year. The new estimate is 26 million tons, down from the July forecast of 32 million tons and significantly lower than the 35.1 million tons exported in the 2023/24 fiscal year. This revision reflects worse-than-expected yields, particularly in France and Germany, where prolonged rainfall has hampered production, and in Eastern EU regions, which have been hit hard by drought.
Barley and Corn Production Also Cut
In addition to wheat, the European Commission has lowered its forecasts for barley and corn production. Barley output is now expected to reach 51.3 million tons, down from the previous estimate of 52.7 million tons but still slightly higher than the 47.5 million tons produced in the 2023/24 marketing year. Corn production is forecasted to decline to 61.65 million tons, with Romania, once a key competitor to France in corn production, facing the steepest drop due to severe heat.
Rapeseed Production Takes a Hit
Rapeseed, another key EU crop, is also seeing a reduced outlook. The forecast for the 2024/25 marketing year has been cut to 18 million tons, down from 18.4 million tons in July and representing a 9.4% decrease compared to the 19.7 million tons harvested in 2023/24. This decline in rapeseed production is yet another indicator of the challenging conditions facing EU agriculture this year.
Market Reaction: Prices Bounce Back After Lows
In response to these downward revisions, grain and oilseed prices on the Paris stock exchange experienced a modest rebound:
- September wheat futures rose by 1.9% to €202.25/t ($224/t), marking a 2.8% increase for the week, though still down 6.8% for the month.
- November corn futures climbed by 1% to €198.25/t ($219.56/t), up 2.2% for the week but down 4.9% for the month.
- November rapeseed futures increased by 1.8% to €469.75/t ($520.25/t), reflecting a 4.4% gain for the week, though still down 1.4% for the month.
A Challenging Year for EU Agriculture
This year has proven to be exceptionally difficult for EU agriculture, with adverse weather conditions leading to significant reductions in crop production across the region. The latest forecasts from the European Commission underscore the challenges ahead, with lower yields and reduced export opportunities likely to impact the market for months to come. As we continue to monitor these developments, it’s clear that stakeholders in the agricultural sector must brace for further volatility and uncertainty.
My Comment: The EU’s agricultural sector is facing one of its toughest years in recent memory. With key crops like wheat, corn, and rapeseed all seeing reduced forecasts, the market is entering a period of heightened uncertainty. This situation demands close attention from all players in the market, as the ripple effects of these production cuts are likely to be felt well beyond Europe’s borders.