A French export alliance of grain cooperatives to take on the challenge of Black Sea supplies may not be enough to stop the EU’s top exporter losing the vital Algerian market to Russian wheat, traders and analysts said.
The unveiling this month of Grains Overseas, an unprecedented alliance in which InVivo, Axereal and NatUp will combine soft wheat and feed barley exports outside the European Union, is a response to booming Russian and Ukrainian shipments.
Russia’s rise to become the world’s biggest wheat exporter has reduced French sales in importing countries like Egypt and Morocco, making France more reliant on Algeria, whose tender requirements effectively preclude Russian wheat.
In the 2018-19 season to June 30, France shipped close to 10m tonnes of soft wheat outside the EU, compared with 12m-plus levels seen earlier this decade.
Russian exports fell back from a record-breaking 2017/18, but at 36m tonnes held well above an EU total of 21m.
Grains Overseas, which will involve the merging of trading desks and joint procurement, is aimed at maintaining large volumes of French grain in North Africa while avoiding financial losses that have hurt trading desks in recent years.
"This could be a shake-up for the French sector so it realizes it’s not alone in export markets," one trader said. "The fact you’ve got three big co-ops involved may force the French market to compete on international prices."
France is also coming to terms with the fact Black Sea supplies often have an edge on quality as well as price.
Family-owned Soufflet, another major French grain exporter, last year launched a new port facility on the Atlantic coast, notably aimed at sorting grain more effectively to meet the requirements of milling clients in Africa.
But others warn that France is barely waking up to the rise of the Black Sea region.
Russia has plans to invest tens of billions of dollars to 2035 in the grain sector and is actively seeking access to countries like Algeria and Saudi Arabia that are crucial to EU exports.
"The day that Algeria turns to Russia, the French are doomed," one grain analyst said.
"Until they can compete on quality and price with the Black Sea, the French co-ops can consolidate all they want, it won’t change anything."
Shipments to Algeria made up just over half of French soft wheat exports outside the EU in 2018/19. A strict limit on bug damage currently prevents Black Sea origins from being offered in Algeria’s tenders.
"If Algeria changes its tender terms, French prices will lose 10 euros overnight," one trader said. "Where would French wheat go instead?"
French milling wheat currently trades at around E170-180 a tonne.
Budgetary constraints and a clearout of officials in an ongoing political crisis could encourage Algeria to change tack and accept cheaper Russian supplies, some traders say.
Uncertainty over Algeria’s future import strategy has been heightened by the suspension of the head of state grain agency OAIC in a corruption probe.
InVivo acknowledges the risks in Algeria.