EU forecasts lower grains harvest as world stocks tighten

BRUSSELS (Reuters) - European Union cereal harvests are forecast to be down two percent from last year because of drought in southern and eastern Europe, the European Commission said on Friday.

The Commission forecasts cereal crops at 279 million tonnes, which while less than last year, is still 25 million tonnes above figures from 2007-08, when food shortages led to riots in some countries.

For soft wheat, the harvest forecast is 127 million tonnes, steady with the five-year average, while for maize the forecast is 60 million tonnes, two percent higher than the average over the past five years.

The EU will remain a net exporter of grains, the Commission said, adding that it forecast world grain stocks down 33 million tonnes to 338 million tonnes.

"Over the past weeks, the drought in several regions of the world has led to dramatic price increases for certain commodities, mainly maize and soya which risk destabilising certain sectors of European agriculture," European Agriculture Commissioner Dacian Ciolis said in a statement.

Maize (corn) prices have hit record highs in August, chiefly because of the worst U.S. drought in more than 50 years.

EU maize production is down 11 percent from last year, and wheat is down one percent.

Reduced maize yields are putting the squeeze on other grains crops as users look for alternatives.

French-based Strategie Grains said earlier this month that even an improved outlook for the EU's wheat harvest would provide little relief to grain supply as this would be swallowed up by export demand and a shift in livestock feed.

Strategie forecast EU maize production at 58.1 million for 2012-13, down 13 percent from last years yields.

The analyst also raised its forecast of this year's EU soft wheat crop by 1.7 million tonnes to 125.3 million tonnes, which would still be down 3 percent on the 2011 harvest.

(Reporting by Ethan Bilby; editing by William Hardy and Keiron Henderson)

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