WASHINGTON (DTN)--At its regular weekly grain meeting Jan. 17, the European Union granted a wheat-export subsidy of 10 euros per ton, up from 8 euros last week and 4 euros about a month ago.

It works out to nearly 29 cents a bushel, up from 22.8 cents a week ago.

The Jan. 17 subsidized amount is about 13.84 million bushels, down from 20.85 million the previous week.

The blame for Brussels subsidy spree probably lies with cheap Black Sea wheat, which until this month has been flooding the 15-nation European Union.

In fact, the EU has turned into a net wheat importer, exporting less wheat than it imports. The result is that the EU's own 2002 wheat crop is piling up internally--unused--and officials worry that they will have to buy a lot of domestic wheat into government storage ("intervention") at the end of the crop year (June) if the surplus isn't exported.

So to encourage those exports, Brussels resumed subsidies last month and increased them this month.

The EU has also erected import quotas on Black Sea wheat, beginning this month.

Brussels is also subsidizing barley exports to avoid the same "intervention" costs. Intervention is somewhat similar to the U.S. loan program: Brussels buys surplus grain into government storage at a high price, and then is stuck with it, waiting for world prices to rise.

Brussels usually ends up selling it out of storage at a low price. On Jan. 17, Brussels sold 13.2 million bushels of old barley (2001 crop or older) out of intervention at around $2.07 per bushel. Brussels sells the grain into world export channels.

For 2002 crop barley, the EU isn't at the intervention stage yet. Instead, the EU grain committee granted export subsidies of 30 cents a bushel, on 2.5 million bushels. It compares to subsidies Jan. 9 of 27.4 cents a bushel on 3.8 million bushels of barley.

Also Jan. 17, the EU Grain Management Committee raised its "standing" subsidy on wheat-flour exports to around 65.7 cents for a 100-pound bag. Recently, the committee doubled its standing flour subsidy to around 52.3 cents per hundredweight.

(The standing subsidy means it's available for the asking, subject to quick approval or rejection. In contrast, the Jan. 17 10-euro subsidy on wheat exports is an auction process that the committee runs weekly among exporters).

Finally, the EU has a mountain of old rye in intervention that needs to be worked down. The subsidy on rye-flour exports is nearly $1.38 for a 100-pound bag, raised 16 percent today from the level set Jan. 9

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