BMI View: We forecast a decline in grains growth in 2015/16 in France, as yields will return to trend after extremely favourable weather in the 2014/15 season . We forecast wheat production to grow over our forecast period and expect production to reach 40.0mn tonnes by 2018/19. Milk production in the short term will not be fundamentally affected by the removal of the EU's production quota in April 2015 owing to low farmgate prices , but production will expand strongly out to the end of our forecast period in 2019. Cheese production will grow strongly as international exports will be in high demand. Poultry output growth will outperform that of the broader livestock sector as soft economic growth will encourage consumption.
|Agribusiness Market Value|
|BMI Market Value By Commodity (2011-2019)|
|e/f= BMI estimate/forecast. Sources: FAO, BMI|
Wheat production growth 2013/14 to 2018/19: 2.7% to 40.0mn tonnes. We expect wheat to remain one of the most profitable crops in the country and the most in demand crop for domestic use and exports.
Poultry consumption growth to 2018/19: 4.9% to 1.7mn tonnes. We see stronger long-term demand growth for poultry than for pork or beef owing to poultry's general affordability and reputation for better health benefits than red meat.
Cheese production growth to 2018/19: 12.0% to 2.2mn tonnes. Over the longer term, we expect consolidation in the dairy industry to allow producers to take advantage of export demand. We also expect lower milk prices in Europe due to the end of production quotas from April 2015. The European Commission's decision to adopt new legislation allowing producers to collectively negotiate contracts with processors will improve the profitability of milk production, in turn supporting output.
2015 real GDP growth: 1.3% (upgraded from 0.9% in our last quarterly update and up from 0.4% in 2014).
2015 consumer price inflation: 0.6% (upgraded from 0.4% average in our last quarterly update and up from 0.1% in 2014).
BMI universe agribusiness market value: USD67.0bn in 2015/16, a 1.8% y-o-y increase.
Milk production will grow by just 0.5% y-o-y in 2014/15, to 25.5mn tonnes. We expect sluggish growth, despite the removal of the EU's dairy production quota from April 2015, as a result of low farmgate milk prices. Low farmgate prices will limit the incentive for production, though we expect higher average milk prices over the coming years and therefore a considerable acceleration in milk and dairy products production out to the end of our forecast period.
Grains production was strong in France in 2014/15 owing to good growing conditions and a high area planted due to strong prices across the grains complex. Wheat production increased by 0.8% y-o-y to reach 39.3mn tonnes in the most recent season, while corn output rose by 3.2% y-o-y to 16.0mn tonnes. Despite quality concerns regarding the French wheat crop, exports of the grain have been strong to countries in the Middle East and North Africa region owing to weakness in the euro and the subsequent strong competitiveness of euro-denominated wheat.
We expect wheat production to marginally decline in 2015/16 despite a record devoted area. Growing conditions were ideal in 2014/15 and subsequently we expect yields to decline y-o-y, to trend levels. As such, we forecast a y-o-y decline of 0.6% for wheat and 1.2% for corn. Out to 2018/19, we expect wheat and corn output to increase on the 2013/14 level, by 2.7% and 5.1% y-o-y, respectively. By 2018/19, we forecast France to produce a wheat crop of 40.0mn tonnes and a corn crop of 16.3mn tonnes.