MOISON 2021 - Le point marché de Jean-François Lépy (complet)

Good afternoon, I am Jean-françois Lépy, CEO of Soufflet Negoce. The context in which we operate today has been particularly rich and interesting. Over the past year, we experienced a sequence of prices and volatility not seen in nearly 10 years. We had to go back to the 2012–2013 season to find price levels like we saw this year: a peak of Matif at 270 euros, raw material prices for wheat or corn at almost 300 dollars per ton from major ports. This context is first explained by harvest reasons and especially demand. We came from 2020–2021, a year with fairly good harvests here in Western Europe and the Black Sea, but disappointing on some products. However, we saw an unprecedented demand, particularly from China, which carried out very significant purchases on all international markets, for cereals like wheat but especially for barley, notably feed barley. Note that in this difficult political climate, the Chinese cut off from Australian cereals, which benefited us since it was our barley that went to China. So this new demand context shifted our supply-demand balances, to a more rational high level on the demand side.

Among the factors to watch in the coming weeks: first, the weather. This weather is becoming problematic, even worrying if it persists, particularly regarding the quality of our cereals, whether malting quality for barley or milling quality for wheat. Another important factor is on the consumer side: freight. We are seeing maritime freight levels not seen since almost 2008, making purchases very complicated with highly volatile costs. Let me give an example: on our traditional route where French wheat goes a lot to North Africa, especially Algeria. On the Rouen to Algeria route, we were for a long time between $15 and $20 per ton; today it's between $35 and $40 per ton – that shows the impact. A second factor to follow is what is happening in the United States. The Americans need to produce a large corn crop to rebalance global supply and thus ease prices. That crop is far from done; the start was chaotic, and the coming weeks are very important. If there is another extremely hot, dry episode, it will have an immediate effect on prices. Finally, perhaps the most important factor today is one actor: China. China has launched very significant purchase programs for this new season. We need to see if they will continue these purchases over time. If they do, we will have extremely volatile, even bullish markets. But if the Chinese actor withdraws for several months and we don't see them, we may have the opposite phenomenon: a lull and a marked easing of prices.

In early July, we are about to bring in the 2021 harvest in this hemisphere, particularly in Europe, coming off this difficult year. We hope to see very adequate production levels that will allow us to export wheat and barley. Similarly, on the Black Sea side, harvests are also very good, close to records. Looking at the main benchmark for our cereals and wheat – Russia – it is a contrast to last year when southern Russia suffered a difficult harvest. This year it's the opposite: harvests will be very good, close to records. That should herald an important export campaign. However, the Russian government has imposed a tax on cereal prices, making anticipation and loading difficult, so the market is barely engaged. Any unplanned surplus of harvest will put pressure on prices, and that is what is happening now. If we go to other regions, particularly South America and Brazil, which is enduring its biggest historical drought, there will be very little Brazilian corn available this summer. Briefly, a word on the French market: the current weather will allow for volumes. We are fairly sure of having comfortable volumes in both wheat and barley. I'll give an estimate – I'm putting myself out there, and I specify the date: we are July 12. We estimate a French harvest between 37.5 and 38 million tons. That figure will be comfortable, allowing us to export to third countries at least 10 million tons. That will be much better than the year we just experienced.