French wheat export target at risk as competition bites

29.01.2018

French overseas wheat sales will probably be smaller than expected because of fierce competition from nations such as Russia and Argentina, an exporters’ lobby group said.

Shipments to countries outside the European Union are unlikely to meet the 9.3mn metric tonnes forecast by crops office FranceAgriMer, according to Jean-Pierre Langlois-Berthelot, president of France Export Cereales. FranceAgriMer has lowered its outlook three times this season and warned of a further cut.

“It’s too much,” Langlois-Berthelot said in an interview in Paris on Tuesday. “We aren’t loading a lot at the ports. We really need to have a huge trend and we are not helped by the weather. With a lot of rain, it’s really complicated to load.”

The Black Sea region is a major threat to the EU’s top producer. Russia has been increasing market share in top importer Egypt as well as in sub-Saharan Africa, traditionally a key buyer of French grain. The euro’s rally to a three-year high has also hurt French shipments because it makes purchases of European wheat more costly.

Exports to non-EU countries totalled 3.55mn tonnes in the first half of this season, just 38% of FranceAgriMer’s estimate. In October, the crops office had projected shipments of as much as 10.2mn tonnes.

France managed to sell only one cargo to Egypt’s state-run buyer so far this season, where tenders are being dominated by No 1 shipper Russia. There’s also a flood of vessels heading from Argentina to Algeria, France’s biggest market.

“We have been nearly totally taken out of the public market in Egypt,” Langlois-Berthelot said. “In Algeria, we have competition from Argentina because they have wheat to sell.”

Morocco, which needs to import due to a small crop, is also tapping other suppliers, he said. Another blow has come from nations in sub-Saharan Africa, which have transitioned to using different quality grain from the Black Sea after deluges ruined the French crop in 2016.

While switching to other origins was a huge job for millers in countries such as Cameroon and Senegal, bakers weren’t bothered, Langlois-Berthelot said. Those countries have traditionally used French wheat partly to make bread similar to baguettes.
Overcapacity in the flour market in those regions also means that if millers buy cheap Russian wheat, others need to follow in order to remain competitive, France Export Cereals analyst Margaux Verdier said.

It’s not all bad news for France. Production has rebounded this season and sales to other EU countries have risen after poor harvests in Spain and Germany. France has also managed to ship to unexpected markets and the recent drop in futures will help sales. Paris wheat is trading near the lowest level since March on the Euronext exchange, previously known as Matif. Prices have fallen about 8% in the past year.

“We lost €5 or €6 on the Matif so we are more competitive,” Francois Farges, deputy director at Cerevia, a union of French grain co-operatives, said in an interview in Paris on Thursday. “We found some new destinations. Of course we won’t touch the target that’s on our balance sheet, but we will be very near.”

Shipments including those to EU countries will likely be close to 17mn tonnes this season, Farge said. While a better quality crop has led to exports to Saudi Arabia for the first time ever, that won’t be enough, Langlois-Berthelot said.

French hard-wheat sales to Saudi Arabia “is good news because it shows we are able to do that,” he said. “But in the end it’s less than 500,000 tonnes and we need to export 9 to 10mn tonnes.”

France needs billions of euros of investment to overhaul its grain industry if it’s to compete with powerhouses in the Black Sea region, according to farmers in Europe’s top wheat producer.

It will probably cost about €14bn ($17bn) over 15 years to reduce production costs and make the nation’s wheat attractive again, Philippe Pinta, president of the French Wheat Growers Association known as AGPB, told reporters in Paris last week.

Growers in France must improve the protein content if they are to gain a bigger slice of global pie, according to AGPB. A higher-than-average quality crop this season meant France exported wheat to Saudi Arabia for the first time and that’s helped offset a disappointing pace of shipments.


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