France remains Europe's agricultural powerhouse

New food and beverage research report about the agribusiness market and future in the 2010. Will the decline continue? One component that needs to be considered is bioethanol

by S. C.

France is the EU's biggest grain producer and its second largest milk producer. It still leads the EU in terms of oilseed, beef and sugar beet production, to name just a few. And it retains an unrivalled reputation for the quality of its produce, including wines, cheeses and top quality meat. But while some sectors remain strong, others are troubled in the face of a continuing recession and tough market realities. In BMI's France Agribusiness Q110 report, we examine some of the issues surrounding key industries and how they are likely to play out in the longer term. The dairy sector faces the most pressing challenges. The country's farmers are in revolt over tanking dairy prices which have in recent years been propped up by the EU's quota system. That system is now being phased out. Under the Common Agricultural Policy Health Check, European dairy quotas will be raised at the rate of 1% per year until the quota's abolition in 2015. While larger producers will be freed to raise their output, smaller, less efficient producers could be forced out of the market. The country's farmers say they are now forced to sell milk at half its production cost, while retailers keep prices level and continue to enjoy healthy profits. The past year has seen near-constant unrest among dairy farmers, with countless litres of milk poured into fields to underline the farmers' point. But the French government is unlikely to let its dairy farmers face the vagaries of the market without putting up a fight. French Agriculture Minister Bruno Le Maire said on October 5 that 20 EU nations supported a Franco-German proposal to introduce a new regulatory framework to replace the quota system. "We can't just leave agriculture to the laws of the marketplace," Le Maire said. In the eight months from January to August 2009, the collection of cows' milk in France was down 4.4%, according to France Agrimer. The manufacture of butter was down 1.2% and the manufacture of cheese from cows' milk was down 1.7%. BMI forecasts a 4% drop in milk production from 25.0mn tonnes in 2008 down to 24.3mn in 2009. In 2010, we see milk production increasing modestly to 24.4mn tonnes, as the next 1% quota increase takes effect. France is still the EU's biggest grain producer. In 2009, the country's grain crop increased modestly by 0.4% to 70.6mn tonnes. This was in part due to unexpectedly high wheat yields. Despite a 3.4% year-onyear (y-o-y) reduction in area under wheat harvest to 5.3mn hectares, favourable weather conditions led to increased production, up 1.1% y-o-y to 39.4mn tonnes. In 2010, we expect production to increase slightly by 1.2% to 39.9mn tonnes. But a global wheat surplus has seen prices drop to levels not seen since early 2007. Will the decline continue? One component that needs to be considered is bioethanol.

Source: Business Monitor International