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Price surges on EU market in response to weather conditions

06 September 2010

In July, ‘European grain prices have jumped 25% ... as hot weather and drought have hit crops just before harvesting in Western and Eastern Europe.’ Prices have risen from an expected level of €110-114/tonne to €178/tonne on some markets. However the picture varies across Europe, with hot weather helping ripening in areas of Spain. However, the current increase in grain prices is not likely to be sustained according to analysts at F.O. Licht, given that the underlying supply and demand balance remains unaffected: although ‘less will be produced than last year … large stocks mean there should be no fundamental fear about supplies.’ In response to price increase however the latest available figures show a sharp decline in EU wheat exports.

Copa-Cogeca meanwhile is arguing that grain price volatility reinforces the need for a strong CAP ‘to ensure that markets function better’ and to provide effective safety nets for farmers. Copa-Cogeca maintains that the current price volatility on EU cereals markets is ‘heightened by speculation’, which undermines the ‘market predictability’ which farmers need to ensure proper business development.

Editorial comment

Ensuring a better functioning of markets and greater market price predictability, while reducing the adverse effects of speculation, is of concern to farmers in both the EU and ACP. Currently ACP farmers have particular concerns about the impact of speculation in the cocoa sector. In this context, extending EU policy initiatives on the functioning of food supply chains to the international level, for example the concerted EU member state action around the International Cocoa Agreement (where EU member states dominate), could well offer an opportunity for getting to grips with this area of common concern in a highly pragmatic manner. However, this may well require the elaboration of new policy initiatives to curb excessive speculative investments, while at the same time allowing future markets to play their essential role.


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