Italian politics have impacted on wheat prices, as the euro reacts to populist parties taking control.
A populist coalition was sworn in last week (June 1), narrowly avoiding snap elections, after the anti-establishment Five Star and the right-wing League won the largest share of votes in the March election.
The euro plummeted as it looked as though Italians would head back to the polls, but recovered on the announcement of the coalition.
But analysts said the volatility could continue, with both parties vocally eurosceptic and, although they have both said they will not take the country out of the euro, they have been critical of its impact.
Rupert Somerscales, ODA analyst, said it had been a ‘rollercoaster week for European grain prices’.
“Who would have thought this time last year that chaos within Italy’s political system would have brought new crop prices on the continent – and in the UK – so sharply higher then sharply lower on Wednesday.
“Macro factors, rather than the fundamentals of supply and demand, are playing an increasing role in price determination for continental grains and oilseeds prices.”
He added the most important factor was the euro plummeting against the dollar over the last week, making French wheat even more attractive in export markets.
And gains on the continent had translated ‘nearly one for one’ for UK prices, with UK farmers benefiting from the higher price.
Gleadell’s David Woodland said despite the politics entering the market, weather was still the major factor, with prices easing as concerns slightly diminished.
But the Italian turmoil was ’pushing the market lower and adding to the negative sentiment’, he added.
Benjamin Bodart, CRM agricommodities, said UK prices were not immune to the correction seen on Matif and Chicago wheat futures and after the sharp rally ‘when a new contract high of £161.50/tonne was reached’ prices traded lower.
He said the main catalysts were the pressure from the EU ‘as well as operators fixing and selling new crop at current levels’.
He added the UK cereals supply and demand remained tight and wheat and maize imports continued to run high.