French Traders Miss Out on Algeria Tender as Rain Hits Deals

Updated on
  • France’s wheat market is ‘frozen’ due to weather, Agritel says
  • French traders miss out on Algeria’s tender on quality worries

After France’s worst flooding in decades, there are now signs of trade disruptions as waterlogged fields threaten to reduce wheat quality.

French traders either refrained from selling or offered higher prices in last week’s Algerian tender on concern they wouldn’t be able to meet quality standards, according to people familiar with the deals. Farmers and industrial companies are also hesitant to sign sales contracts due to uncertainty about quality, French farm adviser Agritel said in a report e-mailed Monday.

"The market is frozen as a result of the current climate conditions," Agritel said. "Farmers are reluctant to sign contracts, often not knowing the scale of the reduction or quality of the crop. The same situation is happening to industrial clients."

The winners of the tender for Algeria, the top buyer of French wheat, included Italy’s Casillo Group, the U.S.’s Bunge Ltd. and Germany’s BayWa AG, said the traders, who asked not to be identified because the transactions aren’t public. While French wheat was among the origins offered, the country’s biggest trading firms were absent or not competitive, they said.

Excessive Rain

France, the European Union’s biggest wheat producer, has been deluged with water this season, spurring concerns that the excessive rain will reduce quality and make it unsuitable for bread-making. Algeria tendered last week to buy at least 50,000 metric tons of wheat for shipment in September, about two months after the start of the French harvest.

"We have seen these rain events continue across wide parts of Europe, not only France but also Germany," said Stefan Vogel, head of agricultural commodities research at Rabobank International in London. "I would assume that there are quality impacts on both wheat and barley."

Wheat purchases by North African countries including Algeria and Egypt are closely monitored by traders because they’re among the top three buyers globally. Algeria probably bought about 300,000 tons in last week’s tender, less than the 400,000 to 500,000 tons traders had previously estimated, the people said.

Wheat Fungus

In May, parts of France got the most rainfall since 1959, according to crops office FranceAgriMer. Wet weather means crops are more prone to fusarium, a fungus that can produce mycotoxins in grains and affect human and animal health. There’s also a greater chance of septoria, a fungus that produces small oval- to diamond-shaped spots on leaves.

Milling wheat futures for December delivery were unchanged at 162 euros ($181) a ton on Euronext in Paris.

France lost market share in Algeria during the 2014-15 season after heavy rains reduced wheat quality. This year, sales are closer to normal levels. In the first 11 months of the season, exports to Algeria are up 62 percent to 4.2 million tons, according to data from FranceAgriMer.

The condition of France’s soft wheat is already showing signs of deterioration. In the week to June 20, 71 percent of crops were rated good and very good, down from 75 percent a week earlier, FranceAgriMer said in a report Friday. At the same time last year, 81 percent was in top condition.