Radiation fears lift Japan rice futures on debut

Radiation fears fuelled a rise in rice futures on their first day of trading in Japan for 72 years, in an apparent signal of the premium buyers are prepared to pay for certified supplies of the grain.

While no trades were completed on the Tokyo Grain Exchange, buy and sell orders were placed some 35% higher than the pre-dealing reference price of 13,500 yen a kilogramme, triggering exchange circuit breakers and prompting an increase in exchange price limits.

On the Kansai Commodities Exchange, where trading began without an initial reference price, the January lot traded at 19,210 yen.

The deals were the first since Japan in 1939 suspended futures trading, in a drive to secure food supplies, with the highly-regulated nature of the country’s rice market stymieing many efforts since to revive the contract.

Contamination fears

The price moves reflected "concerns about the supply of quality rice", Standard Chartered analyst Abah Ofon said, with exchange restrictions on quality – including limits on radioactive emissions -providing reassurance to investors.

Concerns over contamination of home-produced food with radiation from the Daiichi nuclear plant in Fukishima, which was damaged in the March earthquake and tsunami, have prompted at least 14 prefectural governments, accounting for more than 40% of rice output, to test rice fields.

In beef, Japan last week broadened to four prefectures, including Fukushima, a ban on beef shipments. The country’s beef exports fell 12.5% in May from a year earlier, latest data show.

"The launch of the rice contract on the Tokyo Grain Exchange should help to prevent the distribution of poor-quality rice," Mr Ofon said.

Price prospects

However, he urged caution over expectations that rice prices would remain elevated in Tokyo, and elsewhere, despite recent firmness prompted, in Chicago, by an official forecast that US output will drop 23% in 2011-12 to a 13-year low.

Stronger physical prices in Thailand, the top exporter, are down to promises made by the newly-elected government.

"Overall, while bullishness linked to supply dynamics in Japan and the US could keep rice markets nervous, we expect rice prices to decline steadily as global supply remains sufficient," Mr Ofon said

The best hope for prices was buying by China, which is reported to be buying a record amount of rice from Vietnam.

http://www.agrimoney.com/news/radiation-fears-lift-japan-rice-futures-on-debut–3452.html