The smallest French wheat crop in more than a decade is spurring speculation the European Union’s largest producer will have to boost imports to meet its domestic and export demand.
At least one French company is negotiating to bring grain from Romania as heavy rainfall in May and June damaged this year’s crop, according to a trader familiar with the matter, who asked not to be identified because the deal is not yet finalized. French farmers will probably harvest the smallest crop since 2003 and the outlook could still get worst, Offre & Demande Agricole said.
French wheat futures for December delivery have jumped more than 7 percent since reaching this year’s low on July 1 on the Euronext exchange in Paris. That’s widening the gap to prices in other countries including Ukraine and Romania, and boosting the attractiveness of imports for traders looking to benefit from price disparities.
“It is very unusual to see France importing wheat, even more so as early as July, August,” said Benjamin Bodart, a director at adviser CRM Agri-Commodities in Newmarket, England. “Imports may be used to deliver against futures just to profit from the premium of French wheat versus Black Sea wheat.”
The wheat crop in France will probably fall by 26 percent to 30.4 million metric tons in the 2016-17 season started this month, said Paul Gaffet, an analyst at ODA, a consultancy in Bourges. Production could still be lower than forecast, he said, adding that traders will need to import good-quality wheat from countries in southern Europe to be able to increase France’s export potential.
France usually imports 200,000 to 400,000 tons of wheat a year either from other European countries or from Canada as the nation doesn’t produce the very high-quality grain sometimes needed for baking bread, Nicolas Ferenczi, chief economist at the country’s wheat producers association AGPB, said by phone. While imports are possible given this year’s harvest, it’s too early to say if they will be above average as that will depend on the nation’s export program, he added.
A record crop last year left stockpiles of about 4.9 million tons, an increase of 48 percent from a year earlier, according to FranceAgriMer. As inventories are of high-quality grain, an increase in imports will depend on what production comes to and the nation’s exports, said Ferenczi of AGPB, a member of Paris-based union of French growers Orama, which expects the crop to be anywhere between 30 million and 35 million tons this year.
While analysts keep slashing their forecasts for the French wheat crop, production in the Black Sea region just keeps on getting bigger. Russia will harvest a record 69 million tons in 2016-17, according to Dmitry Rylko, director general of Moscow-based Institute for Agricultural Market Studies, or Ikar. The Ukrainian crop will also be better than previously forecast, said Kiev-based market researcher UkrAgroConsult.
Milling-wheat futures for December climbed 0.9 percent to 169.25 euros ($188) a ton in Paris Thursday. That’s more than $20 a ton higher than the better-quality grain in Ukraine and Romania traded on the physical market, according to data Wednesday from UkrAgroConsult on Bloomberg. French wheat usually has a protein content of about 11 percent, lower than the 12.5 percent quality in the Black Sea region.