Cereal grains, livestock, and wine grapes dominate France’s agricultural sector. Farmland covers around half of the country, the highest proportion in the EU. There are approximately 29 million hectares in production, and the typical farm averages 55 hectares compared to the EU average of 16 hectares. Over the past couple decades, farm size has shifted towards larger operations, and the number of people working on farms has decreased to just 3.6 percent of the country’s total population. These changes demonstrate a movement towards greater commercialization of French agriculture. As a result, production and exports of important cereal grains are growing.
The cereal sector forms the backbone of French agriculture, and the importance of cereals is evident in the country’s local markets as well as abroad. Wheat is the country’s biggest cereal crop. Bakers use the soft wheat variety to make the famous French baguette among other foods. France’s bread-making sector rakes in an estimated $2.9 billion in sales annually, and the country’s citizens eat on average more than half a baguette per person daily. On a global scale, France produces 39 million tonnes of wheat annually, putting the country in the Top 10 of producers even though it only makes up about 4 percent of international wheat production. Based on these numbers, there is no doubt that European cereals production and global trade are materially affected by French markets.
French Cereals Exports
France is the world’s third-largest exporter of cereals after the US and Russia, trading approximately 45 percent of its total harvest to foreign markets annually. France exports over 30 million tonnes of cereals, which is dominated by wheat exports at approximately 18 million tonnes each year. Corn and barley are also important exports, each of which typically reach 5 million to 6 million tonnes annually. In comparison, the US exports 88 million tonnes of cereals annually. Russia exported 48 million tonnes last year, a figure that is growing rapidly. Competition from the US and Russia has grown, but proximity to big bread consumers in North Africa and Italy will continue to support France’s position as a prime exporter.
Current Status and Forecasts
The effects of climate change threaten growing French cereal production. Hot temperatures stunt the growth of cereal crops, thereby cutting their yields and reducing their sale value due to a lowered protein content. This year, intense heat followed by torrential rains stifled crops in France leading to a surge in Paris wheat futures prices to five-year highs. The French heat wave contributed to world wheat stocks dropping for the first time since 2013.
The heat wave this summer stretched across most of Europe, and this year’s cereal harvests across the continent are expected to be halved. Strategie Grains forecasts a 10 percent smaller EU soft wheat harvest this year, which could present trouble for European bread makers. For France, analysts from the agricultural ministry expect the country’s soft wheat harvest to decline to 33-35 million tonnes, from 36.6 million tonnes in 2017. Analysts were concerned that protein content would be sharply affected by the drought. Fortunately, the percentage of the crop with a protein content below 11.5 percent increased only modestly this year to 12 percent from 9 percent last year. So despite slashed yield outlooks, grain quality does not appear to be greatly affected. The protein content of wheat is important because it plays a role in the baking process and how well dough forms.
With red indicating dry conditions and green healthy, the map on the left above shows extremely poor crop health across many of the wheat-growing regions in France. The right-hand chart shows the same data for French wheat in time series format, with each district’s evapotranspiration value weighted by its wheat acreage and then added together.
Despite the ongoing weather concerns, France AgriMer forecasts increased wheat exports this year due to intra-EU trade at 9.1 million tonnes, a 12-year high for the country. The last time intra-EU French wheat exports reached over 9 million tonnes was in 2005/06, and in the past few years have only reached 5 million tonnes. Exports outside of the bloc are forecast at 8.4 million tonnes.
US producers were not subject to the drought experienced in Europe this summer, and their outlook for cereals production looks bright. This presents an opportunity for North American farmers to take advantage of the lapse in production from their European counterparts. French wheat exports also face competition from Russia, which is interesting because just a quarter century ago Russia was a net importer of wheat. The country is rapidly increasing production of cereals, especially wheat, and has quickly become the world’s second-largest exporter.
Russia’s record exports this year may present an opportunity for France to increase its wheat exports in the medium term. A bumper harvest in Russia this year could lead to a smaller crop next year because of burdensome stocks, creating an opening for France wheat exports to rebound. The average result of a recent Reuters poll indicated that EU wheat exports could rise in 2018/19 to 23.3 million tonnes from 21 million tonnes this year.
France is Positioned to Maintain Production
Despite the unfavorable weather conditions this year, France’s well-organized agricultural sector seems positioned to retain its influence on global cereal markets.
The Paris Basin, the core wheat producing region, enjoys warm temperatures, a large population, and good transport. The temperate climate promotes good crop quality and allows for easy operation of farm machinery. The region’s population of over 20 million provides a large local market. Once farmers harvest the wheat, they send it to market efficiently using the area’s excellent transport system. Farther away, an extensive road and rail network provide fast access to core European markets. The Basin also enjoys a convenient location for Middle Eastern, North African, and UK business through numerous high-capacity ports on the Mediterranean Sea, Atlantic Ocean, and English Channel.
France’s well organized farming sector gives it a competitive edge. According to Coop de France, 75 percent of farmers belong to a cooperative. In fact, the cereal data published by their agricultural statistics organization, FranceAgrimer, is based on data from ‘collecteurs’ only. Collecteurs are natural or legal persons who exclusively carry out the marketing of cereals from producers and who process cereals for the needs of the industry or collect them for resale. Appointed by cooperatives, they specialize in marketing cereals that are not used for on-farm consumption. This system of collective bargaining gives farms greater market power, helping them to remain profitable. In aggregate, the system plays an instrumental role in maintaining France’s position as a top wheat producer. The EU’s Common Agricultural Policy (CAP) regulatory/subsidy framework has also acted powerfully to protect French agriculture from global competition.
All of these positive factors can be expected to combine to help France win productive investments in its cereals sector and maintain its position as a top cereals producer globally.
France’s position as a top wheat exporter in the EU may be working for the country for now, but stiff competition coupled with the effects of global warming may lead to its replacement in the long run. The Black Sea region’s wheat-export share has grown sharply recently and looks to continue. Black Sea producers have been able to withstand a wheat glut and low wheat prices because of rock-bottom production costs. In response, France should try to attract agricultural investment and foster new trading relationships where possible. Since the country would face great difficulty lowering its costs, France must protect and exploit its reputation for high quality in order to remain competitive with its tough Black Sea rivals.