Industry Trend Analysis - French Wheat Exports To Remain Subdued As Heat-Wave Hits Output - AUG 2017

BMI View: We revised down slightly our forecasts for France ' s 2017/18 wheat production due to the hot and dry weather reco r ded recently, but still expect the country to record a bumper crop. However, French producers are unlikely to regain dominance in the North African export market this year, due to a strengthening currency and strong competition from the Black Sea region. We maintain our positive outlook on wheat prices, which will trend moderately upwards to 2021 .

The outlook for the 2017/18 French wheat crop has been deteriorating over recent weeks, as the country reaches the end of the harvest. Hot and dry weather has been affecting much of southern Europe. As a result, we have revised our wheat production forecast for France downwards slightly, by 0.2mn tonnes to 34.5mn tonnes. This still constitutes a significant rebound from the weak output of 29.7mn tonnes recorded in 2016/2017. Last year the French crop was badly impacted by heavy rainfall around the harvest season.

Despite recording robust production growth, French exports will struggle to reaccelerate in 2017/18. Total wheat production will not return to the pre-2016/17 levels this season, limiting exportable supply. Moreover, the recent strengthening of the euro will hurt export competitiveness, having edged upward since the beginning of 2017. As such, the main challenge to French exporters will come from record production in the Black Sea Region, one of its main competitors for key exports to North Africa. Our forecast of a bumper wheat harvest of 65.9mn tonnes in Russia is being confirmed and, at 27.2mn tonnes, the Ukraine will be enjoying its second largest harvest since the demise of the Soviet Union.

Strengthening euro to dampen wheat exports
France - Exchange Rate, EUR/USD
Source: Bloomberg, BMI

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