Recession fear hits European grain prices

2008/10/16

Heavy falls on stock markets and fear of recession has hit crop trading in Europe, with grain prices plunging on the Euronext futures market in a major signal of alarm, dealers said on Thursday.

"The agricultural markets are not escaping the bearish trend. Fears of recession are prompting fear of a drop in demand in the coming months," said one trader.

"The usual indicators (such as the Chicago commodities exchange) are cast aside. Today it's the CAC 40, the Nikkei or the Dow Jones (stock indexes) that are dictating the trend," he said.

The standard French wheat price fell further to 138 euros per ton on Thursday from 142.25 euros on Wednesday. It has declined from a peak of 248 euros per ton in February.

European grain and oilseed future contracts were all either down or unchanged on Thursday during mid-day trading on the Euronext exchange.

Mounting fears of global recession hammered world stocks on Thursday, with Tokyo suffering its worst loss for two decades, closing down more than 11 percent, and European indices briefly shedding almost 6.0 percent.

Oil prices meanwhile slumped further, Brent crude sliding below 68 dollars a barrel to the lowest level for more than 15 months as slowing energy demand took its toll, traders said.

Grain prices surged last year owing to increased world demand, notably from booming Asian economies, and also the controversial use of grain for the production of biofuels, together with increased production costs partly associated with a high oil price.

The rise in the price of grains sparked food riots in several developing countries. (source: SAPA)