EU should act to end food speculation after wheat price rises, warn millers

By Mike Stones

- Last updated on GMT

Related tags Cereal Russia Rye

Co-ordinated EU-wide action is needed urgently to end food price volatility induced by market speculation, warns the European Flour Milling Association after wheat prices reached a 23-month high yesterday.

Speaking after Russian Prime Minister, Vladimir Putin announced a ban on grain exports leading to record price hikes, the association highlighted the corrosive effect of food speculators.

Laurent Reverdy, the association’s secretary-general told “We consider that this situation requires a significant reaction of public authorities to fight artificial and detrimental food price volatility induced by market speculation. We are convinced that European coordinated measures by public authorities are necessary to provide a clear signal to all operators on the futures commodity markets​.”

Increased volatility

Market speculation is a key reason behind the current price rises, he said. “The rise in cereal prices is market speculation, which seems to be fuelled by statements of speculators exaggerating the current uncertainty over harvest prospects in regions hit by adverse weather conditions. This leads toincreased volatilityand affects the whole cereals chain​.”

The association said it was difficult to gauge the impact of the temporary Russian grain export ban at this stage. But quotations on the EU cereals market have increased since the beginning of July by more than 40 per cent for wheat.

However independent market monitoring reports from the Food and Agriculture

Organisation (FAO), United States Department of Agriculture (USDA), European Commission (EC) and International Grains Council (IGC) all confirm that recent price rises are not supported by market fundamentals.

Recent cereal crop estimates in key world growing regions (EU included) seem high enough to meet the global demand even with the severe setback in the Russian and Ukraine cereal harvest​,” said Reverdy.

Yesterday, Putin confirmed a ban on the exports of grain and grain products from 15 August until 31 December 2010. "I think it is advisable to introduce a temporary ban on the export from Russia of grain and other agriculture products made from grain," ​he said.

One of the world’s biggest producers of wheat, barley and rye, Russia exported a quarter of its grain output last year.

Following widespread drought and continuing wildfires, the country’s deputy agriculture minister Aleksander Belyayev recently predicted this year’s wheat harvest to be between 70-75m tonnes compared with 97m tonnes last year.

Speaking before the export ban the National Association of British & Irish Millers (NABIM) said it was too early to predict what effect the lower Russian harvest would have on the effect on European flour products such as bread and biscuits.

Too many variables

The European wheat harvest is likely to be between 5 -10 per cent below forecast but, at present, there are too many variables, to predict the impact on bread and biscuit prices,”​ said a spokesman.

Meanwhile, EU's internal market commissioner, Michel Barnier, condemned food price speculation last year. “Speculation in basic foodstuffs is a scandal when there are a billion starving people in the world. We must ensure markets contribute to sustainable growth. I am fighting for a fairer world and I want Europe to take the lead on that​.”

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