* Serb wheat stock 500,000 T, to double if harvest good
* Serb maize surplus seen at 1.6 mln T in 2009/2010
By Gordana Filipovic
BELGRADE, May 5 (Reuters) - Wheat prices in Serbia have hit a two-year low and are down 60 to 70 percent from a year ago, depressed by big inventories and weak exports of lesser quality grains, industry officials said on Tuesday.
Serbia, the second biggest Balkan grains producer after Romania according to the Food and Agriculture Organization, has an estimated surplus of between 400,000 and 500,000 tonnes of wheat, enough for four or five months of domestic consumption.
"That is a lot, because we are only a month away from the new harvest and if the government fails to do something about encouraging wheat exports, the situation could become critical," said Zarko Galetin, head of the Novi Sad Commodity Exchange.
Prices for Serbian wheat are 105 euros/tonne at a time benchmark wheat contracts in Europe are trading at 146.0 euros/T. With low protein content, wheat from Serbia is faring poorly against crops from Russia, Romania, Ukraine and Bulgaria.
A rainfall by mid-May could boost yields ahead of the 2009 wheat harvest, but massive inventories and low domestic demand would keep a lid on the prices of the new crop, resulting in financial losses for farmers, agriculture officials said.
Others in the region have granted subsidies to exporters or sold in government-to-government deals, Galetin said.
"Our monthly wheat exports of around 25,000 tonnes are not enough to empty rollover inventories before the new harvest," said Vukosav Sakovic, the head of Zita Srbije, an association promoting grains production and exports.
"Our initial estimate for the 2009 wheat harvest was 2.2 million tonnes," Sakovic said. "April was a dry month and if there is no rainfall in the next 10-15 days we will have to revise (down) this estimate."
Serbia will harvest wheat from 600,000 hectares this year.
"A decent rainfall will mean a good harvest, but it will also leave us with around one million tonnes of surplus wheat," Sakovic said.
Serbia sells wheat to Macedonia, Albania, Kosovo and Bosnia, all part of the CEFTA free trade area in southeast Europe.
A year ago, Serbia had to import 200,000 tonnes of wheat to bring down its domestic prices, which were three times current levels, to put an end to a tenfold rise in domestic prices fuelled by strong export demand following a year of drought and a fall in global fall in output.
MAIZE EXPORTS MORE ROBUST
High inventories were not a problem for maize, with monthly exports of up to 150,000 tonnes via the Romanian port of Constanta gradually lifting domestic prices. Spot maize rose by 3.5 percent in the last week of April to 10.2 dinars per kilo.
Big European traders, including Cargill [CARG.UL] and Nidera, were shipping Serbian maize to the Middle East and the Mediterranean, but mostly to Spain, officials said.
Strong export demand could lift 12-month exports through October to 1.5 million tonnes and a good 2009 harvest could mean 1.6 million tonnes of new maize for export, Sakovic said.
For millers, who paid prices 60 to 70 percent higher last year for wheat, the low forward price of the new crop -- trading almost 20 percent below the spot price -- meant little as the economic downturn has weighed on their liquidity.
Most of them borrowed last year when the dinar traded at 76 to the euro. But the currency lost a quarter of its value since the outbreak of the global financial crisis in October 2008, creating liquidity problems for many millers.
"For many of us it will be difficult to buy new wheat because a mill typically needs 5 to 10 million euros to do that and it is no longer easy to borrow from banks," said Dusko Djukanovic, the chairman of the association of millers in Serbia's breadbasket region of Vojvodina. (Editing by Adam Tanner)