August 6, 2018 / 6:15 PM / 14 days ago

French seed group Vilmorin says too early to see weather, trade effects

PARIS, Aug 6 (Reuters) - France’s Vilmorin, one of the world’s largest seed makers, said it was too early to tell if drought and heatwaves that have scorched European farmland and sent grain prices soaring would have a significant effect on its growth in the coming year.

Rising crop prices are generally favourable for Vilmorin as they boost the income of its customers while higher oil prices have also made biofuels made with crops like maize (corn) more attractive, Chief Financial Officer Vincent Supiot said.

“We’re going to need higher prices to last a bit longer in order for our customers to really put more crop in the soil and increase cereal sowings, unlike this year,” Supiot told a conference call on Vilmorin’s full-year sales.

Extreme weather was supporting higher prices but could also threaten the output of both Vilmorin and its customers, he said.

Weather effects varied depending on the time of year and location of crops, he said, noting that the intense heat in France came after the mid-July period that is the most sensitive time for maize crops there.

Heat and drought have hurt crops in northern Europe and other major cereal producing regions worldwide, fuelling a grain market rally after years of depressed prices.

Vilmorin supplies seeds for grain crops and vegetables, and competes with larger rivals like Bayer, which last year acquired U.S. farm supplies giant Monsanto.

It reported on Monday a slight rise in like-for-like sales in its 2017-2018 financial year to June 30 and confirmed guidance for a fall in its full-year operating margin compared with 2016-2017.

The French firm had not observed any significant impact so far from tariffs imposed by the United States and China and other economies in an escalating trade dispute, Supiot said.

While uncertainty over trade could be unfavourable for demand, Vilmorin’s seed production was generally located close to its end markets, including in the United States, and so was less affected by tariffs, he said.

However, fellow French firm Bonduelle, a major vegetable producer, said on Monday it expected trade negotiations involving the United States and Europe would be a negative factor in sales and earnings growth in 2018/19.

Regarding a European Union court decision last month that gene editing techniques should fall under strict EU rules covering genetically modified crops, Supiot echoed the disappointment of other seed firms.

Vilmorin would continue to conduct research and development in Europe using such breeding techniques but would sell any resulting products elsewhere in the world, he added.

Vilmorin’s majority shareholder, farmer-owned cooperative Limagrain, earlier this year threatened to pull its research activities out of France after opponents of gene editing sabotaged some of its test fields. (Reporting by Gus Trompiz; Editing by Richard Lough and Adrian Croft)

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