French rail strike leaves grain market grappling with stocks

By Valerie Parent and Gus Trompiz

PARIS/VERNEUIL L'ETANG, France, June 18 (Reuters) - A prolonged rail strike in France has led to spiralling transport costs for grain firms and raised the risk that the EU's biggest crop producer will be saddled with more stocks than expected when the summer harvest arrives.

Elaborate efforts to find trucks and barges to replace idled freight trains should avert a full-blown crisis feared earlier in the strike, traders and grain handlers say, and the adoption of a contested rail reform by parliament last week may mean the worst of the disruption is over.

But acute problems in some inland regions could leave bigger than normal old-crop stocks spread between farms and silos, and France's farming agency says it is unsure about the supply situation just days before the 2017/18 season closes on June 30.

Soufflet, one of France's largest grain firms, says train stoppages have come on top of disruption to river transport since the start of the year.

"The exceptional circumstances we have experienced since January will lead to a doubling in Soufflet's end-of-season stocks to around 500,000 tonnes," Francois Berson, head of grain procurement at Soufflet, said.

"We have had to switch some export loadings to Germany because we weren't able to bring goods to port in France."

River transport has been hit by heavy rain as well as lock outages, and the rolling rail strikes since April have accentuated reliance on increasingly expensive and scarce trucks.

Farmer-owned cooperative Valfrance, which spans farm belts east and north of Paris, expects to have nearly twice the normal amount of wheat left in stock at the season's end, its president Christophe Grison said.

"We've been severely affected by the rail strikes," he said at a storage site in the village of Verneuil l'Etang. "We've had around a hundred trains cancelled and trucks are dearer."

Valfrance expects a bill of at least 300,000 euros ($348,000) due to lost trains, or 12 euros a tonne, while Coop de France, the association of French agricultural cooperatives, estimates the average cost for grain handlers at 15 euros per tonne.

One freight train in France typically carries as much grain as at least 40 trucks.

French starch makers also face extra costs as they usually rely on trains for half of the crops they process, although alternative arrangements have averted production outages, Thomas Gauthier, director of industry body Usipa, said.

Some traders played down the threat to the upcoming 2018/19 season, arguing farmers are better equipped than in the past to store grain on farms and that expected barley exports to China this summer should make room for the new harvest.

But while farming agency FranceAgriMer officially projects wheat stocks below the average of recent years, it says its outlook could be revised.

"The problem is we're not able to put numbers on the volumes not sold and held over to next season," Remi Haquin, head of FranceAgriMer's cereal committee, said. "It's not simple to estimate the supply situation."

($1 = 0.8624 euros)

(Reporting by Valerie Parent and Gus Trompiz; editing by David Evans)

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