Algeria's move to halt imports of French wheat, in apparent fallout from a diplomatic row, threatens to leave France with a hefty stock surplus and encourage rivals to challenge its dominance of its top export market.
French President Emmanuel Macron in October questioned whether there had been an Algerian nation before French colonial rule and criticised the country's "politico-military system". Algiers later shut its airspace to France's military and recalled its ambassador from Paris.
Algeria's state grains agency OAIC has excluded French offers in its past three milling wheat import tenders, traders said, adding that diplomatic tensions have reinforced a push by OAIC to diversify its supply away from France.
The north African country has been the largest market for French wheat exports in recent years and the loss of sales represents a major setback and could leave the EU's top wheat producer holding large stocks at the end of the season.
Algeria is one of the world's largest milling wheat importers, bringing in around 6 million tonnes annually in recent years.
France has usually claimed the majority of sales, meaning Algeria has often represented around 40-50% of French wheat exports outside the European Union.
Farming agency FranceAgriMer recently increased its forecast of French wheat stocks at the end of the 2021/22 season in June to a 17-year high, partly due to flagging sales to Algeria.
Uncertainty over Algerian demand has underscored concerns that the pace of EU exports is too slow to meet forecasts.
"The European export campaign is far from complete and the problem for France is that it has lost a piece of the Algerian market," Philippe Chalmin, economist and director of commodity report Cyclope, said.
A third season of large sales to China and a current run of shipments to Morocco have partly offset the shortfall in Algeria, suggesting alternatives for France amid growing global wheat trade.
Traders also see scope for more sales to Egypt after the country booked a first cargo of French wheat this season in late December.
The drag on overall EU exports may be limited by the fact countries like Romania, Bulgaria and Germany are seen as well placed to fill part of recent Algerian orders, with Russian competition curbed by export taxes and a quota applied by Moscow.
Easing Of Diplomatic Tensions
Traders see hope of OAIC reopening to French wheat in coming months. There has been an easing of diplomatic tensions, while OAIC reportedly hesitated over French supplies in its last tender due to attractive prices.
OAIC does not disclose details of its grain tenders. Algeria's agriculture ministry and France's foreign affairs and agriculture ministries did not immediately respond to requests for comment.
But even if France salvages some sales to Algeria later this season, traders say it faces an ongoing challenge in its traditional export bastion.
OAIC's move to change its tender terms earlier this season to make them more viable for cheaper Black Sea origins could herald stiffer competition, particularly if Russia scales back export taxes.
"Algeria will revert to buying French wheat (once the political row subsides) but it will have to match international prices," a French trader said.