Ruslan Sokol has no idea why prices for wheat he grows on the vast flatlands of central Ukraine have started to recover from five-year lows. A thousand miles to the west, French farmer Stephane Jean knows all too well.
While both have suffered from a world grain surplus, their fortunes are now diverging. Floods have cut crop yields to a 30-year low in France, the European Union’s top producer. That’s opened the door for exporters in the Black Sea, where Russia is reaping a record harvest, bins are overflowing in Romania and Bulgaria, and Ukrainian farmers are collecting more than expected.
“I know nothing about the harvest in France, just what I’ve heard from you,” Sokol, 36, said by phone from the Kiev region where he farms wheat, barley, soybeans, corn and sunflowers on 1,000 hectares (2,500 acres). “Prices are low, but there was an increase about a week ago.”
After three long years in a bear market, Ukrainian and Russian milling wheat prices are up more than 6 percent since mid-July, data from researcher UkrAgroConsult show. That follows the deluge in France, where crop damage will send exports plunging to a 15-year low this season, according to InVivo, the nation’s largest wheat shipper.
France’s share of the world market is set to fall to 7 percent from 12 percent and InVivo, a union of over 200 cooperatives, will need to tap supplies from elsewhere including Black Sea nations to meet demand from customers.
For French farmers, earnings may drop by half to 740 euros a hectare ($340 an acre), Paris-based agricultural adviser Agritel says. The average 120-hectare harvest will rack up losses of almost 60,000 euros and the proportion of those ending up in the red will increase from 51 percent in 2015, already the highest since 2009, according to Agritel and Orama, a union of growers’ associations.
“I’ve had bad harvests and I’ve had bad prices, but I have never had both” together, said Jean, 53, a third-generation farmer who grows wheat and rapeseed in Thoiry, about a half-hour drive from the Palace of Versailles. “We were able to make a living. This year we won’t. We will have to go into savings.”
Wheat for December delivery slid 0.5 percent to $4.40 3/4 a bushel on the Chicago Board of Trade by 12:05 p.m. in London. Front-month futures have surged 8.1 percent this month, paring losses to 6.2 percent this year.
The downpours, which also threaten wheat in neighboring Germany, the second-biggest EU producer, and the Baltic states, will force importers to turn to growers in the Black Sea region to meet their needs. That clears the way for nations such as Russia and Ukraine to sell to markets from Morocco to Algeria.
Romania and Bulgaria also have the chance to ship to France.
Bulgaria’s Vitagrain BG had “very preliminary” talks to sell wheat to France, Chief Executive Officer Martin Roussev said. It’s possible “to see some shipments from Bulgaria to France if the price justifies,” he said, adding that many French traders were awaiting final harvest estimates to decide imports.
At least one French trader is also looking to bring grain from Romania, said a person familiar with the deal who declined be identified. Wheat from Bulgaria and Romania doesn’t incur import duties in France as they are part of the EU.
A shift to supplies from the Black Sea brings longer-term risks for French growers as their customers find new providers.
“It worries me a bit for the future,” said Michel Portier, head of Agritel. “When you are used to buying fruit at a store and the store is closed for construction, you go to another store and you realize that the fruit is just as good.”
(Source – http://www.agweb.com/article/french-floods-bring-surprise-gains-to-a-ukraine-wheat-field-blmg/)