United Kingdom. Crop update - France weighs heavy on otherwise positive prospects July 21, 2016

Highlights

The EU28 grain harvest is now under way in most Member States. While the prospects for both yield and quality look good in most Member States, this cannot be said of France, the EU28's main grain exporter. While the early cuts of the winter grains in the southern EU28 are suggesting good yields, cloudy and wet weather over the last two months in France has damaged the outlook for both the size and quality of its grain crop. The total MY2016/17 EU28 grain crop is subsequently revised down to just under 312 MMT, little changed on MY2015/16 but nearly 16 MMT lower than the record set in MY2014/15, with the possibility of a further reduction post-harvest once the impact on the French crop becomes clearer.

Executive Summary

Favorable growing conditions across much of the EU28 through the spring and into early Summer have been contrasted by very wet and cloudy weather across some of the key growing regions of France since mid-May. As a consequence, an improved outlook for much of the EU28's grain crop has been more than offset by expectations of poor quality and a much reduced harvest in France. The wheat and barley harvests are now under way, albeit two weeks late in France, while the corn crop is generally reported to be developing well, albeit on a reduced area year-on-year. Although the total area planted to grain crops in the EU28 is little changed year-on-year, a reduction in the area planted to corn has been offset by increased plantings of both barley and rye. Similarly, a much improved forecast yield for corn is offset by reduced yield of the other grains such that total production in MY2016/17 is now forecast to be 311.75 MMT, little changed on MY2015/16 but nearly 16 MMT below the record crop experienced in MY2014/15. Within this total, wheat production is forecast at 154.5 MMT and barley and corn both at 62,000 MT, down 5.5 MMT, and up 700,000 MT and 2 MMT, respectively, year-on-year. Of these three crops, the change is most significant for corn given the reduction in planted area. Rye and oats production are both forecast up around 500,000 MT year-onyear in MY2016/17 while mixed grain production is forecast up over 300,000 MT. Only sorghum production is currently forecast unchanged year-on-year. As always, much will depend on the weather over the coming weeks, not just for crop development but also for harvest volume. In addition, the true extent of the damage to the French crop is only likely to become clear at harvest. The total supply of grains in the EU28 in MY2016/17 is forecast at 359.1 MMT, down around 5 MMT largely due to reduced forecast corn imports. Total EU28 grains consumption is currently forecast at nearly 288.3 MMT in MY2016/17. Within this total, Food, Seed & Industrial (FSI) use of grains, which has been following an upward trend but faltered in MY2015/16, is forecast to rise once again in MY2016/17, mainly due to increased year-on-year industrial use of wheat in the biofuels sector in Poland and the UK. Total feed use is also forecast to rise in MY2016/17, albeit below the previous forecast. EU wheat exports in MY2015/16 are now estimated to have reached 33.5 MMT by year end, buoyed by North African demand in the latter part of the season. Following a prompt start to the MY2016/17 campaign, wheat exports are currently forecast to reach 30.5 MMT in MY2016/17, tempered somewhat by a reduction in forecast French exports. Although 3 MMT down year-on-year, if realized this would still be a considerable export volume given that MY2013/14 was the first year the EU28 exported more than 30 MMT of wheat. The net result is a 2 MMT reduction in stocks in MY2016/17. For rice, trade data indicate that a number of Least Developed Countries have responded to the duty free/quota free access to the EU market afforded to them under the EU's “Everything But Arms" arrangement. In particular, EU rice imports from Cambodia, Myanmar and Guyana have increased in MY2014/15, supporting rising domestic consumption of rice in the EU28. Rice imports have started MY2015/16 strongly meaning that full year imports are again forecast to rise on a market year basis. Combined with a year-on-year increase in domestic production, further consumption growth is forecast. With imports currently forecast to stabilize in MY2016/17, the upward trend in EU28 rice consumption is forecast to continue, albeit to a lesser extent than in recent years.

Country specific There is a great deal of uncertainty for the French grain crop outlook - both its size and quality have been negatively impacted by excessively wet and cloudy weather since mid-May in central, northern and eastern France but the extent of the damage is unclear. The poor weather also means the harvest is running about two weeks behind normal. While it is a more positive story in the south west and on the Atlantic and Channel coasts, the affected areas report widespread lodging. The percentage of small grains is also reported to be high which could lead to further losses at harvest (when grains are too small, they may pass through the combine). Additionally, fungal infestation, which could lead to higher mycotoxin levels, is widely reported. The French wheat crop is subsequently revised down 5 MMT on the previous forecast with the possibility of a further reduction post-harvest. The reduced quality, such as low specific weights, problematic falling Hagberg numbers and protein problems, could present export challenges. Durum wheat quality is also thought to have suffered in central France although not in the traditional growing regions in the south east and south west. An increase in the area planted to durum means a sizeable crop is still expected but, as with soft wheat, the quality issues could have an impact on export opportunities. The weather is also reported to have taken a heavy toll on the barley crop and, like wheat, lodging and fungal infestation is widespread. While the forecast for barley production is reduced 750,000 MT, it is likely to remain a sizeable crop due to the large planted area. Again, as with wheat, reduced quality, such as poor specific weight, is expected to reduce export opportunities, most notably Chinese demand for French malting barley. While the French MY2016/17 corn crop forecast is reduced as well, production is still forecast up year-on-year after the poor yield in MY2015/16. Elsewhere in the EU28 the story is much more positive. In the UK, while no one expects a repeat of the large crops experienced in the last two years, prospects remain good, both in terms of size and quality despite recent wet weather. In Germany, while parts of the country have experienced very wet weather, its timing is not thought to have had too detrimental effect on the grain crop and the sentiment remains positive. Further south, in Spain, favorable spring conditions both in terms of precipitation and mild temperatures have boosted winter grain yields. Indeed, if it were not for a reduction in the area planted to corn and a lower yield due to the use of short cycle varieties, Spain would be forecasting a record grain crop. While the quality of the grain crop is generally good, there is some concern for the durum wheat crop due to Hessian fly incidence. In Portugal, favorable weather conditions are expected to result in a good yield for winter crops. However, spring rains and reduced crop margins are thought to have resulted in an historically low area planted to corn. In the Czech Republic, Slovakia and Croatia, it is a story of good weather and a positive outlook for all grain crops. Further east, Romania's wheat crop is reported to be developing extremely well. Despite some heavy rains and summer storms, the crop is forecast to exceed the previous year's level on a slightly increased planted area. Initial tests indicate that wheat quality is expected to be good. The barley crop is also developing very well and the prospects are very positive. Finally, all currently bodes well for the corn crop but with crop entering the critical phase of pollination, the focus remains on the weather. Moisture levels across the country have improved over the spring and summer meaning development conditions are currently much better than in MY2015/16. It is a similarly positive story in Bulgaria where the outlook remains positive for all of the grain crops. With the wheat harvest well under way and the barley harvest all but complete, quality is reported to be very good with some farmers reporting record yields. The corn crop is also reported to be doing very well. Similarly, Hungary's corn crop is still forecast up year-on-year after the poor yield experienced in MY2014/15 and despite a reduction in the planted area. Finally, in Greece, very favorable weather conditions are expected to result in a comparatively high year-on-year yield for the durum wheat crop meaning its wheat crop is revised up 200,000 MT. As in some other Member States, low corn prices and poor margins have discouraged farmers from continuing to increase the planted area which is now forecast unchanged from MY2015/16.