France is getting beaten in the global wheat market even as the nation produces its largest crop yet.
The country is having a hard time attracting buyers as a worldwide glut and weakness in the currencies of top growers, such as Russia, Ukraine and Australia, provide importers with cheaper alternatives. There’s so much excess grain in the country that some silo operators are maxed out. Exports may fall 3.3 percent this season, crop office FranceAgriMer said.
Egypt, the world’s biggest wheat buyer, picked offers from Russia and Ukraine over French bids in six tenders since July 21. Importers have more choices as larger harvests for exporters including the U.S. and Australia will leave world output close to the previous season’s record, the International Grains Council estimates.
“France will have a tough time selling its bumper crop this year with strong competition from the Black Sea,” Abdolreza Abbassian, a senior economist at the United Nations’ Food & Agriculture Organization, wrote in an e-mail.
The currencies of Ukraine and Russia, which both have ports on the Black Sea, have declined more than 40 percent against the dollar since September last year compared with the euro’s 13 percent drop.
“Both the ruble and the hryvnia have been very weak over the past 12 months, so if you are a grower there then you are getting paid fairly well in local currency,” Dave Norris, an independent grain broker in Harrogate, England, said by e-mail. “Also, there’s a lot less good farm storage in these places, so a lot of farmers simply have to sell straight off the combine and take whatever they can get for their crops. That inevitably makes the region aggressive, particularly early in the season.”
Ukraine had exported about 3.4 million metric tons of wheat as of Sept. 1, the Agriculture Ministry reported, 24 percent more than the same time a year earlier. Russia’s grain exports for September may reach a record, exceeding 4.7 million tons, Tass reported Thursday, citing Russian Grain Union President Arkady Zlochevsky.
Australia, the world’s fifth-biggest shipper of the grain, may export 17.5 million tons in the year started July 1, 6.5 percent more than the previous forecast and 6.1 percent more than a year earlier, the nation’s Bureau of Agricultural & Resource Economics & Sciences said Tuesday. The country’s dollar has weakened 21 percent against the U.S. currency in the past 12 months.
Good harvests for some importers such as Egypt are adding to pressure from ample supplies in exporting countries, according to Olivia le Lamer, head of commodity crops at FranceAgriMer.
Farmers in Morocco, France’s second-biggest wheat client outside Europe, harvested a record domestic crop this year. Egypt may cut wheat imports by 5.2 percent to 10.5 million tons in the 2015-16 season as the country reaps the biggest crop in at least eight years, IGC data showed.
“Demand isn’t sufficient to absorb the abundant offer,” Le Lamer said at a press conference in Montreuil-sous-Bois, France Sept. 9. “We have conditions today that are assessed as extremely bearish.”
European Union export licenses for soft wheat have fallen behind last year. About 3.69 million tons were contracted as of Sept. 8 , 31 percent less than the same time a year earlier.
French wheat prices are starting to become competitive, said Paul Gaffet, an analyst at Offre & Demande Agricole in Bourges, France. Prices of milling wheat for loading in the main French grain port of Rouen tumbled to 155.66 euros a metric ton, the lowest in five years, on Sept. 10, FranceAgriMer data show. That’s a 22 percent slump since the July 1 start to the season.
Milling wheat for December delivery dropped 0.7 percent to 168.75 euros ($190) a ton on Euronext in Paris Wednesday, paring the decline this year to 16 percent.
France’s record crop means exporters can’t sit back and wait for Black Sea shipments to peter off later in the season, he said.
“We have to be competitive from the start of the campaign, we have to clear out,” Gaffet said. “Normally we can sit back until October.”
France’s soft-wheat exports may drop to 18.79 million tons in 2015-16, 3.2 percent than a year earlier, according to the crop office.