All eyes are on French game
FOR the past three weeks, all eyes have been on France. But its not just football fans who have been watching developments across the water with interest. As harvest approaches, grain traders have been paying close attention too.
For while the British may know a thing or two about marketing techniques, when it comes to price, France is definitely the pace setter. Freight charges and quality differentials mean UK farmers have to trade at a discount to compete.
Unfortunately, things are not shaping up too well in France, with carryover stocks bulging, a record wheat crop on the horizon and new crop grain prices on the floor.
Official figures put wheat plantings at almost 5m ha (over 12m acres) – up 3% on last year. Despite a wet April – which delayed maize and sunflower drilling – cereal crops have progressed quickly in all French departments. Barley is already being cut and wheat should get going in a weeks time.
A repeat of 1996s record yield (7.3t/ha) would produce a wheat crop of over 36m tonnes, generating an export surplus of about 18m tonnes – well up on last years 14m tonnes.
There has also been much use of intervention this season – especially in the closing days of May. Currently there are about 2m tonnes of wheat, 2m tonnes of barley and 500,000t of maize in store.
Significantly, much of the wheat is actually being held in co-op and merchant silos, public stores having filled up with barley and maize earlier in the campaign.
"This is having an even more depressing effect on prices than would otherwise have been the case," observes Gilles Girault of Agralys. "If ONIC (the intervention agency) had managed the market sooner and better, prices would not be so low now."
Wheat is currently valued at 73 francs/100kg (£73/t) ex-farm in the centre of France for August. This is at a discount to intervention, representing the cost of holding grain until public stores open in November.
"We face a storage deficit for new crop in France," says Alain Benloulou of Cargill, Paris. "There is real pressure to sell cereals in August and September just to make room for maize in October.
"It is crucial we have a strong export campaign from Brussels early in the season if prices are to have any chance of improving later on."
But even if Brussels shows willing (and the recent decision to double set-aside suggests the commission is not going to be aggressive in using export subsidies to clear stocks), the problem will be lack of demand.
"North Africa has just had a good harvest," says Soufflets Mark Treadway. "This has been a very important outlet for French grain in recent years, but it will be importing less this year."
With continuing economic problems in Asia, France will be hoping buyers in the middle east, such as Iraq and Iran, will fill some of the gap in demand.
But there is one plus in the market, says Mr Treadway. The build up of stocks in the EU and the US will help iron out some of the price volatility seen in recent seasons. And, if there are any upsets at harvest, in France or elsewhere in the EU, then there could be opportunities for quality grain to make a decent premium.
Mark Treadway, from Soufflets head office at Nogent-sur-Seine, says lack of world demand is one factor damping down French prices.