Farm commodities soar as Japan nuclear fears ease

by Agrimoney.com

Agricultural commodity prices staged a dramatic rebound, sending US corn, cotton and pork up the maximum allowed by exchanges, spurred by signs of a resolution to Japan's nuclear crisis and strong export data.

Wheat surged more than 8% in Chicago and Paris, while soybeans and New York sugar added 4%, as the run of bearish sentiment which brought crops to multi-month lows reversed.

Fears of meltdown at Japan's Fukushima nuclear plant eased amid reports that three of the six damaged reactors had been stabilised, with helicopters dumping seawater on the tsunami-damaged plant, and with work underway to resume electricity supplies which would allow conventional cooling systems to restart.

Meanwhile, the dollar sank 1% against a basket of currencies amid expectations of a large sell-the-dollar, buy-the-yen switch as Japanese assets are repatriated to pay for clearing up earthquake and tsunami damage.

A cheaper dollar makes dollar-denominated assets such as agricultural commodities more competitive as exports.

Export surge 

And data on Thursday, covering the week to March 10, showed that European and US exports were picking up even before last Friday's Japanese disaster sent prices of crops, and other riskier assets, into a tailspin.

Farm commodity prices as of 17:30 GMT Chicago corn: $6.46 ½ a bushel, +4.9% Chicago soybeans: $13.40 a bushel, +4.1% Chicago wheat: $7.12 ¾ a bushel, +7.7% Paris wheat: E223.25 a tonne, +8.2% London wheat: E192.00 a tonne, +7.9% New York cotton: 192.12 cents a pound, +3.8% New York sugar: 26.78 cents a pound, +3.6%

Weekly US exports of old crop corn more than doubled to 1.04m tonnes, topping 1m tonnes for the sixth week out of the last seven, with those for wheat, at about 860,000 tonnes for both the current crop year and 2011-12 combined, also exceeding market expectations.

In Europe, wheat exports for the current week hit 540,000 tonnes, the highest for two months.

In livestock markets, sentiment was also spurred by reports that Japan had bought pork, easing fears of interruptions to trade caused by damage to logistics in the top pork-importing nation.

'Strong fundamental intact'

The signs of demand gave vent to feelings among many investors that the falls in crop prices over the last month had been overplayed, with stocks of major farm commodities remaining tight enough to support firm prices even if Japan's disaster trimmed domestic demand and dented world economic growth.

"Amid the tumultuous and downward shift in prices, it would be easy to lose sight of the strong fundamental underpinning of the rally in agricultural markets which, in our view, remains intact," Barclays Capital said.

In fact, many analysts believe that Japan may need to increase imports to replace stocks or production lost to the tsunami.  

In the US, Mike Mawdsley at broker Market 1 said: "The talk was all about how much demand are we going to lose in Japan. Now it is all about how fast they need stuff."

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