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France Agribusiness Report Q2 2011
Business Monitor International, Jan 2011, Pages: 53
The France Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on France's agribusiness service.
Publishers View: We see encouraging signs for some French agricultural sectors this quarter, notably milk production. Both farmgate prices and deliveries were up year-on-year in September 2010, leading us to forecast gains in production over the coming year. Meanwhile, the decline of French livestock production looks likely to continue and new figures show the pork industry is shrinking at a faster rate than previously thought. Soaring feed prices are adding to farmers' woes and we forecast significant declines in both pork and beef production over our forecast period.
Key Views:
- We estimate 2010 pork production of 19.21mn tonnes, down 4.1% year-on-year. For 2011 we are forecasting a further decline of 5.5% to 18.15mn tonnes.
- The beef industry is in similar difficulty and a looming free-trade deal with Mercosur threatens to exacerbate woes. In 2010, we estimate beef production of 1.44mn tonnes, down 1.7% year-onyear. In 2011, we forecast a further decline of 1.3% to 1.42mn tonnes.
- We have raised our 2011/12 wheat forecast and now expect production to come in at 40.2mn tonnes, up 5.1% year-on-year and up around 2mn tonnes on our previous report. Over our forecast period, we expect wheat production to rise by 10.3% from 2009/10 to reach 40.6mn tonnes in 2014/15.
- Milk production estimated at 24.7mn tonnes in 2010, up 4.3% year-on-year. For 2011 we are forecasting production to rise to 24.9mn tonnes.
Industry developments:
In November 2010, average farmgate milk prices in Rhone-Alpes fell to EUR29.85 per litre. Although down on the year's high of EUR33.66, reached in August, prices were nevertheless higher for the time of year than in 2008 or 2009. And in September, French milk deliveries reportedly came in at 1.79mn tonnes, up 11.8% year-on-year. The figures paint an encouraging picture for the French dairy industry.
On December 9, the European Commission (EC) released its proposals for dairy industry reform, having considered the High-Level Group's recommendations. The measures, announced by Agriculture Commissioner Dacian Ciolos, would allow for producers to negotiate collectively with dairies, in effect forming a cartel. This should to some degree improve the balance of power between producers and processors in farmers' favour.
However, such producer groups will only be allowed to represent a maximum of 3.5% of total EU or one-third of any member state's production. The proposals will need to secure the approval from the 27 EU farming ministers if they are to become official EU policy. We are watching developments closely.
The same month, France was criticised by the EC for protectionist moves to protect homegrown producers of sheep and goat milk cheeses. The EC has attempted to relax the rules on transport of dairy products from areas at risk from scrapie, citing evidence the disease cannot be transmitted to humans by consuming such products. France has refused to relax its measures barring imports of the products. The EC has initiated EU infringement procedures against France. If the EC does not receive a satisfactory response after two months, which should elapse at the end of January 2011, it may refer France to the European Court of Justice.
In early December 2010, EU health ministers voted in favour of extending compulsory labelling of agricultural produce to cover lamb, pork and poultry. The EU's legal teams will review the text of the proposal before it is given a second reading in June 2011. BMI believes the legislation, should it be adopted, will bring benefits to French pork and poultry producers. The move should help to protect French products from cheaper imports from the likes of Eastern Europe, Thailand and Brazil.
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