Grain traders have lamented the speculation opportunities they will lose under economic and monetary Union (EMU).

And participants in the EU's weekly grain tender are biting their nails in case the changeover sends bidding haywire.

But with the euro's birth just days away, the long faces are giving way to a realisation that EMU will radically simplify Europe's grain market, bringing transparency and banishing the distorting effect of local currency swings on competition.

"The euro will help the flow of EU grain inside and outside Europe," said Geneva-based analyst James Dunsterville. "Farmers will be able to see their market potential much more easily."

Isabelle Albouy at the French wheat producer's association AGPB said that while farmers begrudged an expected fall inintervention prices under the euro, they were cheering the end of the extreme distortions that devaluations and revaluations have caused.

"This means the end of the enormous distortions farmers suffer when competitors' currencies weaken," she said. Slides in exchange rates have led to exporters being showered with profit while EU farm payments were calculated at the same green rate.

Time up for green rates

So-called "green rates" have been around since the 1960s to protect EU farmers in strong currency countries. Artificial, fixed Ecu-conversion rates ensure payments from Brussels stay on a par across the EU, but countries with weaker currencies benefit more from them.

EMU will create a level playing field, replacing green rates with fixed euro conversion rates for the 11 states joining.

But the lower rates will cut the amount the EU pays for surplus grain, wiping up to two per cent off the intervention price in the case of France, experts say.

Experts say the benefits of burying monetarydivisions outweigh any gripes. "Anything that tidies up the current system has to be welcome," said one. "Green money falsifies everything and scrapping it will give farmers better comparisons."

But the flies in the ointment will be the four EU states sitting out EMU's first wave, the key grain players being Britain and Denmark, where EU payments in euros will change with market rates from January, complicating trade with euro "ins".

"There's uncertainty over Britain as it could go either way -- a strong pound versus the euro would mean cheap imports and expensive exports whereas a weak pound would mean the opposite," said a trader. "And we still don't know if Britain and Denmark will trade grain in euros or not which makes things tricky."

The EU is considering a correction scheme for the four "outs" in case their currencies move substantially against the euro but such a scheme may take some time to implement, experts say.

"We need Britain to join EMU, then we really would have a simplified, commonmarket in agriculture," remarked an analyst.

Traders face change of scenery

Grain trades within the EU will no longer require currency hedges to protect against exchange rate risk, simplifying transactions but also wiping out a source of extra profit.

Traders bemoan losing arbitrage opportunities under EMU but say the gains merit that. "We'll lose a chance to speculate but the impact won't be huge," said one. "The euro will make our lives a bit boring but will be good for the market as a whole."

"Traders may dislike transparent markets, but they're not strictly there to make money in forex," remarked an analyst.

Hedging will still be needed for deals outside Europe, where the dollar is expected to remain the de facto grain currency.

"Chicago will always be the benchmark," said an industry expert. "But the euro may become a shop window price for selling EU grain to places like Egypt. All depends on its standing."

Either way, exporters say the euro will give EU grain the transparency andmuscle to compete with the United States on the world market, in line with the aims of EU farm policy reform.

Farmers' grumbles fall on deaf ears

"Farmers always scream and shout but any losses will be marginal," said an official, noting that farmers rarely sell more than a tenth of their grain into intervention.

Nevertheless France plans to speed up its procedure for buying intervention grain so cereals office ONIC cannot buy in March 1999 grain offered in November 1998, paying a lower price.

Farmers and cooperatives are impatient to know if the EU, which stands to nip some 1.3 billion Ecus off its huge farm budget by abolishing green rates, will grant them compensation.

An EU source told Reuters that a farm council in December may be hard pushed to reach a final verdict. "Nothing's been worked out yet, the decision may well be delayed," he said.

Analysts say cutting support prices is inevitable with or without the euro. "In 10 years intervention may be history. You can't justifysubsidising over-production," said one. "Things need to change and farmers know it's for the best."

Euro to start with trickle not bang

Given the two year changeover and that physical grain trades over the counter, quoting in euros will not happen overnight.

"Traders are starting to sit up and take notice but exactly when they will switch over is hard to gauge," said an official.

Analysts say traders may start quoting euros only when their clients do. "I don't expect them to crack open champagne and use euros from January 1," said Dunsterville. "Your average French farmer will still think in francs. The motivation to use euros may come from the other end of the consumer chain."

But a slow start will not cushion any teething problems at the first 1999 EU grain export auction, when trade bids must be re-calculated using euro rates rather than green rates.

Yves Madre at French cereals office ONIC said the conversion posed no problems. "Computers will do everything," he said.

But an EU sourcesaid people were still nervous of mistakes.

"People have realised there's something horrible coming upon January 7 and they're not quite sure how to handle it."