Tokyo Rice Halted After First Futures Trading Since 1939

Rice in Tokyo Gains
An official from the Chiba Prefectural Government Offices prepares to collect rice samples bound for radiation tests at a field in Katori City, Chiba Prefecture, Japan. Photographer: Haruyoshi Yamaguchi/Bloomberg

Rice futures in Tokyo surged in their first appearance on the bourse since 1939, triggering a suspension of trade, on concern radiation from the stricken Fukushima nuclear plant may spread to crops and curb supply.

Trade closed with no deals concluded on the Tokyo Grain Exchange after prices hit 18,500 yen ($238) per 60 kilograms from the opening, compared with the bourse’s reference price of 13,500 yen. The bourse posted today’s settlement at 14,100 yen after the market closed and expanded the daily maximum price limit to 1,000 yen for tomorrow from 600 yen.

The exchange listed rice contracts today for the first time since the start of World War II to boost flagging volumes and profit. The resumption comes as fallout from the Fukushima Dai-Ichi power plant may spread after it was found cattle had been fed cesium-tainted rice straw. Spinach, mushrooms, bamboo shoots, tea, milk, plums and fish have been found to be contaminated with cesium and iodine as far as 360 kilometers (224 miles) from the station operated by Tokyo Electric Power Co.

“People are very concerned that rice supplies may be smaller on fear of radiation contamination,” Nobuyuki Chino, chairman of the exchange’s rice futures trading committee, told reporters in Tokyo. “This was reflected in the prices,” said Chino, who is also president of Tokyo-based grain company Continental Rice Corp.

‘Worsened Image’

Commercial stockpiles of rice, a Japanese staple, may drop to the lowest level in four years in 2012, after the March earthquake and nuclear disaster curbed production, possibly spurring the government to release its reserves, according to the agriculture ministry.

“Today’s session has worsened the image of the exchange,” said Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co. “The reference price and daily maximum limit were too low and too narrow and didn’t reflect current consumer concern over supplies in coming years.”

Consumers are starting to hoard rice from last year because of radiation fears, Kyodo News reported on Aug. 5. An expansion of the bourse’s daily limit may cause excessive speculation, prompting farmers to complain about prices, Saito said.

The Central Union of Agricultural Cooperatives, Japan’s largest farmer group, strongly opposed the rice trade resumption as it would distort prices with speculation and damage stable supplies, the group, also and known as JA-Zenchu, said in a notice on July 1.

Night Session

In night-session trade, which is settled the following day, the closing price will be a reference price for tomorrow’s trade, exchange spokesman Shigeru Nomura said today by phone. If there’s no trade during the session, the bourse will set a reference price at 16,400 yen for tomorrow, he said.

Faced with criticism from consumer groups and opposition party politicians that lax government control has endangered food safety, the ministry has tightened rice screening before the harvest begins in eastern Japan.

The government ordered Fukushima and 13 nearby prefectures to test rice samples before the harvest. Authorities will ban shipments from areas where they find grains containing cesium exceeding 500 becquerels a kilogram. Rice production in Fukushima and neighboring Ibaraki, Miyagi and Iwate prefectures amounted to 1.56 million metric tons last year, out of the country’s total of 8.5 million tons.

‘Growing Concern’

“The timing couldn’t be worse for rice-trade resumption following growing concern over radiation contamination in some food products,” said Hiroyuki Kikukawa, general manager of research at IDO Securities Co.

Japan is self-sufficient in the grain as the government protects growers from foreign competition with a tariff of 341 yen ($4.35) a kilogram on imports. Rice harvesting normally starts in some western areas of Japan later this month.

Kansai Commodities Exchange, based in Osaka, also started trading domestic rice futures today. Trading was suspended 72 years ago when the government put grain production and distribution under its control to secure supplies during the war.

The two exchanges list yen-denominated contracts, with deliverable grades including “koshihikari,” a popular rice brand grown in Japan. Imported rice is excluded from physical delivery at the exchanges as the government maintains control over foreign purchasing and sales.

The Tokyo exchange selected non-glutinous brown rice produced in the eastern prefectures of Chiba, Ibaraki and Tochigi as the standard grade for the contracts. Deliverable brands include rice grown in 12 other prefectures including Fukushima, Miyagi and Iwate, where cattle were contaminated with radioactive rice hay.

The government approved rice futures trading on a trial basis for two years and may decide to halt trading if the market is inactive or unused by hedgers. The Tokyo exchange trades corn, soybeans, coffee, raw sugar and so-called azuki beans.

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