French wheat may fall below intervention levels

Paris grain prices, which fell to their lowest since 2006 last week, may gain only limited support from intervention buying because of a knock-on effect from a shortage of silo space, analysts have warned.

While many European Union countries store wheat bought through intervention buying in state owned, or hired, sites, France's policy of keeping grain at sellers' own storage facilities means many grower co-operatives cannot afford to take the offer up.

Tying up silos would be a risk when the next harvest is only a few months off, analysts said.

It would leave farm co-operatives and merchants with "inadequate storage for the forthcoming harvest", Hugh Schryver, at Glencore's UK grain arm, said.

"Even [intervention] may not provide a solution" to falling prices.

'Especially big risk'

A City analyst told Agrimoney.com: "Selling into intervention looks an especially big risk to take when farmers are already sitting on big stocks, and are looking at another big wheat harvest this year."

French wheat inventories are set to end 2009-10 at 4m tonnes, a jump of nearly 30% year on year, official forecasters believe.

"Sellers may feel they are better off getting shot of the wheat on the open market, even if this means accepting a little below the intervention price.

"This selling is obviously going to have an effect on Paris prices too."

Barley slide

Farmgate prices of barley, for which intervention support will be phased out next year, have already fallen below intervention levels in France, with wheat trading about E5 a tonne above levels of state purchases.

Intervention buying offers, at best, E104.53 a tonne for barley and wheat in 2009-10.

French farmers have, since the intervention buying programme started in November, tendered 967,445 tonnes of barley and minimal quantities of wheat.

Paris wheat for May, which took over as the spot contract last week, stood E0.50 higher at E122.25 a tonne in afternoon trade on Monday.

The March lot touched E115.25 a tonne on March 10, its last day of trading.

 


Agrimoney