EU Grain Farmers May Focus on Quality to Compete in Tough Market
(Bloomberg) -- Europe’s grain farmers may have to focus on quality over quantity to better tackle fierce competition from the likes of Russia.
To appeal to new customers, European Union growers will start cutting back on pesticides and turn toward more sustainable farming methods, including growing non-genetically modified crops such as soy, French farm cooperative Vivescia said. That may help give EU supplies a more competitive edge, especially as many food manufacturers try to tap demand for more sustainable ingredients, according to BNP Paribas SA.
European exporters are finding it harder to compete against bumper supplies from low-cost producers in the Black Sea region, something that’s not likely to change any time soon. EU wheat shipments have plunged 22 percent this season as Russia exports a record amount. How the bloc can adapt to the tougher market conditions was one of talking points among traders gathering at last week’s Platts grains conference in Geneva.
“Certainly it’s going to be more quality and fit for the actual demand from the customer," who’s asking for crops with less pesticides, Benoit Boullet, director of markets at Vivescia, said at the conference.
The food industry is trying to respond to changing consumer tastes. More people are choosing healthier options, organic produce or ingredients made in sustainable ways without the overuse of pesticides and fertilizers, which have raised health and environmental concerns. To help address this, the EU is moving to restrict the use of some pesticides and aims to regulate the use of nitrogen fertilizers in farming.
With a shift toward more certified sustainable produce emerging, that could help the EU become more competitive in the grains markets, according to Alain Butler, senior adviser on soft commodities at BNP Paribas. He pointed to trends that have become popular in cocoa, coffee and palm oil around the world.
European wheat production could gradually decline as farmers produce smaller but better quality harvests, or switch to alternative crops, Boullet said.
“At the moment we have to deal with very depressed farmers and it’s likely to continue,” Benjamin Bodart, director of CRM AgriCommodities, said at the Platts conference. "It’s very, very tough for them, just in terms of cost of production."
©2018 Bloomberg L.P.