Crop prices collapse amid panic over Japan crisis

by Agrimoney.com

"Panic selling" gripped agriculture markets on Thursday, sending corn down the maximum allowed by the Chicago exchange, as the escalating Japanese nuclear disaster gripped investors.

Wheat tumbled 6% on both sides of the Atlantic, while Chicago soybeans fell 4% to their lowest in three months, and corn locked down the 30 cents maximum allowed by the exchange.

Torrid Tuesday - agricultural futures at the close Chicago wheat: $6.67 ¾ a bushel, -7.4% Chicago corn: $6.36 a bushel, -4.5% Chic soybeans: $12.70 a bushel, -5.2% Paris wheat: E203.00 a tonne, -6.3% New York cotton: 190.94 cents a pound,    -3.5% New York cocoa: $3,255 a tonne, -4.0% New York raw sugar: 25.72 cents a pound, -7.7% Prices given for May contracts

Among soft commodities, sugar led the decline, plunging 7% to levels not seen since November, with cotton prevented by losses of more than 7.0 cents a pound by New York exchange limits.

The declines followed further setbacks at Japan's stricken Fukushima plant, where problems have now been reported at all six reactors.

"The market just about had the measure of the earthquake and tsunami. But nuclear meltdown is a whole different ball game," a London trader told Agrimoney.com.

US broker US Commodities said: "A knee-jerk reaction to Japanese nuclear explosions has caused panic selling in the commodity world."

Oil was also lower, despite concerns over unrest in Bahrain, while copper fell to a three-month low, and tin plunged 7%.

Scare stories

There were few estimates on the specifics of how Japan's catastrophe would affect crop markets, although US Commodities reported talk that with "northern ports damaged" the country's imports of corn, largely from America, may fall.

"A drop of 1m-2m bushels per week over the remaining 24 ½ weeks of the marketing year would be 25m-50m bushels, alleviating some of the tightness in the US balance tables," the broker said.

However, investors were bombarded with a barrage of broadly bearish talk, including rumours that a further earthquake was a strong possibility, and of estimates of declines of up to 8% in Japan's economic growth this year.

"We now have a warning of further earthquakes and potential Tsunami over the next 24-48 hours," Jaime Nolan at FCStone's European offices said.

At Illinois-based Powerline Group, Darren Dohme said: "The cost of the clean up will run on for decades.

"The country has so much debt that it doesn't have the ability to barrow the billions/trillions it is going to take to clean up and rebuild."

Wheat rally over? 

On wheat, Mr Dohme added that Chicago's May contract had broken a key support area at $6.80 a bushel "even in the face of the worst [winter] wheat crop ratings in modern times," with data overnight showing only a marginal improvement in parched seedlings in Kansas, America's top growing state.

"Is this a signal that the world is done buying this major food crop?"

Sugar's particular decline reflected weak technical factors, with the sweetener's decline over the last month already having investors worried that further declines were in the offing, Stefan Uhlenbrock at FO Licht said.

"Fundamentally, there is no reason for this," Mr Uhlenbrock said.

"But some participants were nervous already. Sugar has come down quite a bit from its peak in February."

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