The price of most commodities and equities fell Tuesday as investors worried about the worsening crisis at a nuclear power plant in Japan.
Most canola, soybean, corn and oats futures contracts dropped the one-day limit.
Japan is one of the world’s largest food importers. It the top buyer of Canadian canola and No. 2 buyer of Canadian pork.
But the sell off was mostly driven by emotion, not worries about demand.
The Fukushima nuclear power plant, smashed by the earthquake and tsunami last Friday, suffered an explosion on Tuesday in one of its reactors that broke the containment housing, sending low levels of radiation floating towards Tokyo.
With so much uncertainty about the situation in Japan, investors headed to the sidelines, shifting money out of commodities and equities and into safe-haven fixed-return investments and the U.S. dollar. The greenback rose against the loonie.
Oil also fell on the crisis in Japan but also on the situation in Bahrain, where the king declared martial law on Tuesday to try to quell an uprising by the island’s Shi’ite Muslim majority. Next door neighbour Saudi Arabia sent troops on Monday to help the fellow Sunni-led government.
New York light crude closed below $100 per barrel.
My Market Watch column coming in the March 17 paper, which was written on Monday, held out the hope that the lack of selling on Monday might indicate that the month-long decline in canola prices had hit bottom. I speculated that traders had priced in the improved situation in South American soybean crops and in China’s winter wheat crop, as well as the uncertainty in the Arab world. Japan’s earthquake damage would cause temporary disruption, but within a few weeks it would be back importing food, I argued.
That might still be the case, but the rapid deterioration at the nuclear plant has created market panic and that is overwhelming all thoughts about fundamental supply and demand of grains and oilseeds.
With the market focused on Japan it took little notice of flooding in Brazil that is suspending movement of soy and other goods to Brazil’s main No. 2 port of Paranagua.
Recent heavy rains have hurt the soybean crop in some areas of Brazil and some analysts wonder if the forecasts for 70 million tonnes of production will hold up.
Winnipeg (per tonne)
Canola May 11 $525, down $30
Canola Jul 11 $532.90, down $30
Canola Nov 11 $514, down $30
Canola Jan 12 $519.20, down $29.50
The previous day’s best basis was steady at $27 under the May contract according to ICE Futures Canada in Winnipeg.
The May contract 14-day Relative Strength Index was 25. The rule of thumb is an RSI of 30 indicates an over sold market and 70 indicates an over bought market.
Western Barley May 11 $205, unchanged
Chicago (per bushel)
Soybeans May 11 $12.70, down 70 cents
Soybeans Jul 11 $12.78, down 70 cents
Soybeans Nov 11 $12.38, down 70 cents
Corn May 11 $6.36, down 30 cents
Corn Jul 11 $6.425, down 30 cents
Oats May 11 $3.24, down 20 cents
Oats Jul 11 $3.3175, down 20 cents
Minneapolis (per bu.)
Spring Wheat May 11 $8.075, down 51.75 cents
Spring Wheat Jul 11 $8.16, down 50.25 cents
Spring Wheat Dec 11 $8.3175, down 47.75 cents
Light crude oil nearby futures in New York fell $4.01 to $97.18 US per barrel.
The Canadian dollar at noon was $1.0173 US, down from $1.0247 the previous trading day. The U.S. dollar at noon was 98.30 cents Cdn.
The Toronto Stock Exchange composite index fell 72.23 points to 13,546.96.
The Standard & Poor’s 500 Index fell 14.52 points to 1,281.87.
