After 72-year break, rice futures back on the market

Wednesday, 10 August 2011 00:58 - - {{hitsCtrl.values.hits}}

For the first time since World War II, rice futures returned to the trading landscape on Monday, but it took another day for the first contract to be sealed on the Tokyo Grain Exchange.

Not because there were no buyers – quite the reverse. In fact, Japan’s appetite for rice was heavily underestimated on the morning it was inducted back onto the exchange, and keen bidders at the Tokyo Grain Exchange walked away empty-handed Monday after a crush of buy orders came in far above the base price of ¥13,500 ($174) per 60 kilograms, twice triggering a trade suspension mechanism.

Circuit breakers are set off when prices meander more than ¥600 from the starting price, a limit set by the exchange, shutting down trading. Monday bid prices jumped to as much as ¥18,500: Shigeru Nomura, deputy general manger of the business department at the exchange, said the cause for the flood of orders was likely due to growing concerns that the rice supply this year will be hit by both possible radiation contamination and poor weather conditions.

The staple grain had better luck on its second day after some price rejigging. The first contract – a 60-kilogram batch of the popular Koshikari brand to be delivered in January of next year – was executed at ¥17,280 Tuesday morning.

Over in Osaka, rice futures also resumed trading this week on the Kansai Commodities Exchange, where different circuit breaker rules allowed rice contracts for November and January delivery to change hands with the January deals closing at ¥19,210 on Monday. The bourses received approval to revive rice trading from the agriculture ministry last month. The grain went on a seven-decade hiatus when the government assumed control of the grain’s production and distribution during World War II. Rice trading will resume for two years on a trial basis.

The soaring prices on opening day fueled concerns cited by the Central Union of Agricultural Cooperatives, the largest domestic farmer group. The association strongly contested the trading resumption, fearing it would fuel price speculation and put supplies on wobbly footing. (Source: Wall Street Journal)