Boston, MA -- (SBWIRE) -- 02/11/2014 -- We believe the grains sector in France will continue to outperform other agribusiness segments in terms of production growth. This will be reinforced by the ongoing reforms of Common Agricultural Policy subsidies, which are likely to have more of an effect on dairy and livestock farmers than grain farmers. The agriculture minister's proposal to shift some EU subsidies from crop farmers to dairy or livestock farmers could support production growth in the latter, even though we do not see this as sufficient to turn around the current production trajectories of each sector. The meat industry will continue to suffer from recurring scandals linked to the presence of horsemeat on the beef market, which will generate downside risks to demand over the medium term.
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- Wheat production growth to 2017/18: 10.7% to 39.8mn tonnes. We expect wheat to remain the most profitable crop in the country and the one most in demand for domestic use and exports.
- Poultry consumption growth to 2018: 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 2017/18: 8.8% to 2.1mn tonnes. Over the longer term, we expect consolidation in the dairy industry to allow producers to take advantage of rising quotas and export demand. We also believe 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.
- 2014 real GDP growth: 0.5% (up from 0.0% in 2013).
- Consumer price inflation: 1.5% average in 2014 (slightly up from 1.4% in 2013).
- BMI universe agribusiness market value: 6.3% year-on-year (y-o-y) decrease to US$72.1bn in 2013/14.
We have revised up our forecast for 2013/14 French wheat production to 38.4mn tonnes (from 37.3mn tonnes previously) in line with the latest official estimates. The wheat crop has benefited from a surge in plantings and strong yields on the back of favourable weather. French statistics agency Agreste estimates 2013/14 area planted at 5.3mn hectares (ha), compared with 5.2mn ha in 2012/13. Yields are expected to reach 7.3 tonnes/ha in 2013/14, compared with 7.2tonnes/ha in 2012/13. In 2014/15, we believe production will come in at 37.0mn tonnes, as early sowing projections show wheat area planted at around 5.1mn ha.
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