French Wheat Exports in Question as Rain Spoils Crop Quality

Jul 25, 2014 6:43 am ET

(Updates wheat prices in fifth paragraph.)

July 25 (Bloomberg) -- French soft wheat exports, the European Union’s biggest, are at risk of falling after grain cooperatives reported rain spoiled grain quality across the east and north of the country.

Sprouting damage to wheat will hurt France’s ability to sell to North Africa, said Francois Luguenot, head of market analysis at Paris-based Union InVivo, the biggest exporter of French wheat. Valfrance, a cooperative north of Paris, reported part of the 2014 harvest is unsuitable for milling.

France exported 52 percent of its soft wheat harvest in 2013-14, or 19.1 million metric tons, according to crop office FranceAgriMer. Egypt, the biggest wheat importer, received no offers of French wheat at this week’s tender and farmers risk having to sell their crop as animal feed instead of for bread, forcing them to take a price cut.

“The question is where we’ll export French wheat if the quality deterioration is as widespread as reported,” Luguenot said. “Exports to Algeria, Morocco, Egypt, to not even talk about Yemen, are in any case seriously imperiled.”

Milling wheat futures traded in Paris climbed 0.8 percent this week, heading for the first advance in five weeks. Wheat traded in Chicago dropped 0.4 percent over the same period.

Milling Standards

Algeria, the biggest buyer of French grain, and importers such as Egypt set criteria to ensure they receive milling-grade grain. At the Valfrance cooperative in Senlis in the Oise department, farmers had cut about 24 percent of their wheat as of July 23, according to Chief Executive Officer Christian Renard. Quality is a concern rather than yields after rain caused sprouting, he said.

About half of the crop gathered so far had germinated, with Hagberg values of 140 to 150, Renard said, referring to an indicator of sprouting damage and baking quality. French reference values are 220 or higher for milling wheat.

“Panic in the market is growing,” Jean-Xavier Mullie, the CEO of grain cooperative Agora in Compiegne, France, wrote in an e-mailed comment. Agora’s farmers had cut about 11 percent of their soft wheat as of July 19, and 77 percent had Hagberg values below 160, Mullie said.

There are “very few” sellers of milling wheat with Hagberg of at least 220 and “very few” buyers of feed wheat, Mullie said. The price gap between the two qualities was 25 to 30 euros ($33.69-$40.42) a ton as of July 23, he said.

Algeria demands minimum Hagberg values of 240 for wheat it buys, Morocco and Iran require at least 230 and Egypt at least 200, according to Synacomex, France’s grain-export trade syndicate. The number indicates enzyme activity in grain, and a lower value shows more sprouting damage, making wheat less suitable for bread making.

Animal Feed

While French millers can process wheat with Hagberg values between 180 and 200, it’s unsuited for export to Algeria, and values of 150 mean the wheat is downgraded to animal feed, according to Luguenot.

“Exports will be smaller than last year, that much is clear,” said Paul Gaffet, an analyst at Offre & Demande Agricole in Bourges, France. “We don’t yet know the extent.”

Relatively cool temperatures in France from July 9 to 11 were followed by warm and humid conditions, provoking wheat sprouting across all of eastern France, part of the center and the country’s north, according to Luguenot.

’Ugly’ Harvest

“We didn’t expect this mid-June, everything was going smoothly,” Luguenot said. “What’s being harvested now is ugly. It flipped in two weeks.”

Egypt may buy “zero” from France in 2014-15, instead relying on Russia, Luguenot said. Sales to Algeria will be “very difficult,” and France’s biggest wheat customer may switch to Germany, Poland and the Baltic countries, he said.

“There will be wheat of good quality to export from Rouen and Dunkirk, but we don’t know how much,” Luguenot said, referring to the two biggest grain-shipping ports in northern France. “The risk is high.”

At Groupe AdVitam in northern France, farmers had cut about 1.5 percent of their wheat as of July 23, said Maurice Caillaud, in charge of grains. The gathered grain hadn’t sprouted, though starch transformation had started, he said.

Hagberg may end up between 180 and 220, “maybe a bit better for wheat not yet at maturity,” Caillaud said. “If countries like Algeria would be willing to review their specifications, that would help exports.”

Renard at Valfrance said he hopes for higher Hagberg values in later-ripening wheat still to be harvested. The cooperative gathers about 500,000 tons of soft wheat.

Work Halted

At cooperative Sana Terra in Picardie, about 5 percent of wheat was cut before rain halted field work, director Benoit Dewas said. Hagberg values were around 180 for early cuts, and 0.5 percent to 2 percent had sprouted, he said.

The cooperatives reported no issues with yields, protein content or specific weight, an indicator of how much flour can be milled from a quantity of grain. Grain deliverable against Paris milling wheat futures must have minimum specific weight of 76 kilograms (167.5 pounds) per hectoliter (2.84 U.S. bushels) and doesn’t specify values for protein or Hagberg.

The quality deterioration will hurt income for grain farmers, according to Luguenot and Gaffet at Offre & Demande.

“All the feed wheat will have to be strongly discounted to find buyers in Europe, meaning less income for farmers,” Luguenot said. “It’ll be a major loss of revenue. The rain evaporated tens of millions of euros.”