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Germany Agribusiness Report Q1 2010
Business Monitor International, Jan 2010, Pages: 51
Germany Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Germany's agribusiness service.
The European Commission on Monday 15 December 2009 authorised a US$150mn scheme to support income-constrained farmers. Until December 31 2010 farmers will be supported via subsidised loans and guarantees, interest rate subsidies and direct grants. The scheme is open to farmers in all subsectors of primary farming that were not in financial difficulty prior to the food price spikes of July 2008. This is one of the first schemes approved by the commission since the EU permitted limited aid to support primary producers.
As the 2013 expiration of the Common Agricultural Policy (CAP) draws closer, however, Germany, along with a host of EU counterparts, continues to campaign for the creation of a new policy that can help support beleaguered farmers. Agricultural Minister Ilse Aigner wants the new policy to safeguard both farmer incomes and the environment, including more aid for dairy farmers. Aigner even asked for continuous subsidies for producers after the CAP expiration date, a move deemed to be unlikely, given that the massive costs of such policies (the CAP accounted for 40% of the entire EU annual budget) was one of the main reasons why the plug was pulled on the CAP.
Agricultural agency BLE has announced that German farmers have sent about 244,000 tonnes of barley into EU intervention since the beginning of the new purchasing season on November 1 2009. This is in response to the weak price fundamentals caused by a massive European surplus crop in 2009, leading to a resumption of support price intervention purchases. Notwithstanding, we forecast barley to perform the worst out of all the categories covered in our outlook, contracting by 32% to 2014.
Germany is the world's largest producer of biodiesel, accounting for half of the EU's total production. The country's biodiesel industry association expects that production will grow by 20-30% a year, backed by strong demand and new government requirements for blending biodiesel with conventional diesel fuel that came into law in 2007. The country is raising compulsory biofuel blending quotas in fossil fuel as part of a programme to raise levels of environmental sustainability in fuel and energy production. Sugar farmers are set to benefit from a reasonable crop in the 2010 harvest, attributable to favourable weather, which will possibly see it produce more than its EU quota of 2.89mn tonnes of refined sugar. The German Sugar Industry Association believes that the EU's largest economy will produce 1.3mn tonnes above its quota. The EU has relaxed some export restrictions, raising the upper limit of marketable non-quota sugar by 700,000 tonnes, which favours early season plantings given the currently attractive international sugar prices.
This will also benefit exporters as above-quota production is prohibited from being sold for domestic household consumption but can be sold for domestic biofuel production or exported. Sugar exports from the highly supported EU market are quite restricted under rules enforced by the WTO, yet the likelihood of decent weather inspired the EU to push for an increased upper limit to the export quota. The German bioethanol industry is the largest in Europe and stands to gain from the new crop. While the authors predict rather modest year-on-year beet output growth in 2010 of 0.67%, reaching 27.67mn tonnes, we feel that strong price fundamentals underpin good potential for farmer earnings - particularly given the lack of production coming from some notable global producers - leading to more intensified plantings.
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Agriculture - Global Outlook
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