France raises estimates for wheat stocks, still at five-year low

Farming agency FranceAgriMer raised its estimate of French soft wheat stocks at the end of the 2018-19 season last month but the volume was still a five-year low for the European Union’s biggest wheat producer.

In monthly cereal supply-and-demand data published on its website, FranceAgriMer pegged stocks of soft wheat at the end of the past season on June 30 at 2.5 million tonnes.

That was up from 2.4 million tonnes estimated a month ago, but well below an average 2.9 million for the previous five seasons and the lowest volume since 2013-14.

The relatively low stocks volume could help France absorb what is expected to be a much larger wheat harvest this year, particularly given what traders see as tepid export demand at the start of the new 2019-20 season.

On-farm wheat stocks, estimated separately to FranceAgriMer’s main commercial stocks figure, were also expected to have fallen to a five-year low at 400,000 tonnes.

The upward adjustment to FranceAgriMer’s 2018-19 wheat stocks estimate mainly reflected a 200,000 tonne reduction for a demand category covering non-specified miscellaneous uses in France.

Wheat demand was also trimmed due to a slight decrease in French soft wheat exports outside the EU in 2018-19, to 9.7 million tonnes from 9.75 million last month.

A downward revision to French non-EU exports had been expected by traders after a slow end to the season in which France notably saw competition from other origins in its main overseas market Algeria.

The 2018-19 soft wheat exports outside the EU would nonetheless be 19.5% above the 2017-18 level, while shipments within the EU were seen falling around 18% to 7.6 million after a strong previous season.

For other cereals, FranceAgriMer lowered its estimate of 2018-19 maize ending stocks to 2.8 million tonnes from 3.0 million, notably due to a 100,000 tonne increase to intra-EU exports and a 50,000 tonne reduction in imports.

However, expected maize stocks that would be up nearly 10% against 2017-18 ending stocks and also well above a five-year average of 2.5 million.

Estimated barley ending stocks in 2018 were increased to 1.6 million tonnes from 1.5 million, mainly due to reduced export estimates, and would now be 7.5% above the 2017-18 level.

Meanwhile, French and Mexican dairy groups Lactalis and Grupo Lala SAB de CV reached an agreement to end litigation in Latin America, allowing Lactalis to conclude the acquisition of Brazilian dairy producer Itambe Alimentos, Lactalis CEO for Latin America Patrick Sauvageot said on Wednesday.

In an interview with Reuters, Sauvageot said Lactalis and Lala ended litigation in Brazil regarding the Itambe acquisition and in Mexico regarding the use of certain brands.

Lactalis concluded the acquisition of Itambe on Wednesday and will now process 2.3 billion liters (607 million gallons) of milk a year in Brazil.

Lactalis expects its revenue in the country to reach 8 billion reais ($2.13 billion). The conclusion of the deal had been pending the result of arbitration at the Brazil-Canada Chamber of Commerce that began around a year ago.

Lactalis, global owner of brands such as Parmalat, Galbani and Président, agreed to pay around $600 million to acquire Itambe in December 2017, less than six months after Lala acquired Vigor, which owned 50% of Itambe, in August 2017. When it bought the company, Lala valued Vigor at $1.8 billion.

Before Itambe, Lactalis had already acquired Brazilian cheese producer Balkis and some dairy units owned by BRF.

US President Donald Trump on Wednesday ordered an investigation into France’s planned tax on technology companies, a probe that could lead to the United States imposing new tariffs or other trade restrictions.

“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” US Trade Representative Robert Lighthizer said in a statement announcing the investigation. The move gives Lighthizer up to a year to investigate if France’s digital-tax plan would hurt US technology companies.

The “Section 301” investigation will determine if the levy poses an unfair trade practice. Prior investigations have covered Chinese trade practices and European Union subsidies on large commercial aircraft.

French Finance Minister Bruno Le Maire said in March that a 3% tax on the French revenue of large internet companies could yield 500 million euros ($563 million) a year.

USTR said in a statement the “services covered are ones where US firms are global leaders. The structure of the proposed new tax as well as statements by officials suggest that France is unfairly targeting the tax at certain US-based technology companies.”

Reuters