Europe: Feed Prices

European poultry and egg producers are struggling with rising feed costs. Feed represents the largest single production factor for poultry and eggs and feed prices are at historically high levels this year. The European Commission expects poultry prices to rise 10% in 2008.

Tight cereal supplies led the European Commission to propose to set the compulsory set-aside rate at zero, compared to the normal 10% rate, for autumn 2007 and spring 2008 plantings. A lower than expected harvest in 2006 (265.5 million metric tons) led to tightening supplies and historically high prices. Intervention stocks are about 1 MMT in September 2007 compared to 14 MMT at the beginning of 2006/2007. Reducing the set-aside rate from 10% to 0% is expected to increase output by at least 10 MMT and possibly 17 MMT if farmers decide to use the maximum amount of land possible to produce cereals at the expense of other crops.

Wheat is the main European Union grain crop and the wheat producing nations of France, Germany and the UK were hit by drought in the spring and persistent and heavy rains damaged ripened wheat at harvest time. Coarse grain production was also lower in the EU-27. To offset the reduced supply of wheat, the EU will need to import more coarse grains. Since the EU has a zero tolerance policy on non-approved genetically modified products, corn is not allowed to be imported from the U.S. and Argentina, and leaving Brazil as its only major source of imported corn.

Global 2007/2008 wheat production is projected 606.24 million metric tons (MMT). 4.2 MMT lower than the August projection of 610.40 and global coarse grain production is increased 1.9 MMT, to 1,061.76 compared to the August projection of 1,059.83 MMT according to the latest World Agricultural Supply and Demand Estimates published by USDA on September 12, 2007.

Sources: USDA/Foreign Agricultural Service; Europe Press Release; USDA World Agricultural Supply and Demand Estimates; Iowa State University Extension; Various news wires

Free Trade Agreements

The U.S. Senate Finance Committee voted in favor of the initial draft of a free trade agreement with Peru in a “mock” hearing on September 21, 2007, two years after the accord was reached. The current draft was modified early this year to include tougher environmental and labor provisions.

This is the first vote on a free trade agreement since the Administration and Congress agreed on a path for the consideration of four pending free trade agreements last May. The other agreements are with Panama, Colombia and South Korea.

The nonbinding vote is the first step for congressional ratification of the free trade agreement.

The House Ways and Means Committee is scheduled to hold a similar “mock” session on September 25, 2007. The Administration can then send the agreement to Congress under the Trade Promotion Authority (TPA), also called the fast-track rules, meaning Congress must accept or reject the agreement without filibuster of amendment.

The U.S. and Peru reached the accord at the end of 2005 and signed it in April 2006. The Peruvian Congress ratified it a year ago. Peru is also pursuing free trade agreements with the European Union and China.

The Trade Promotion Authority expired on June 30, 2007, however trade deals negotiated under the presidential trade promotion authority are still covered by the Trade Promotion Authority.

In a tele-news conference on September 24, 2007, Acting Secretary of Agriculture Chuck Conner noted the importance to American agriculture of the pending four free trade agreements with Peru, Colombia, Panama and Korea. Taken together, they can generate an estimated $3.2 billion additional agricultural export sales for American producers each year.
Source: U.S. State Department International Information Programs; Office of U.S. Trade Representative;
USDA Office of Communications Transcript by Acting Agriculture Secretary Chuck Conner; Various news wires

Further Reading

- To view the full report, including tables, please click here.