Source: Zero Hedge
A just released report by Goldman’s Jeffrey Currie attempts to quantify the impact of the tsunami on the Japanese economy from a commodity standpoint. Currie summarizes his conclusions as follows: “Assuming that the broader power grid infrastructure has not been permanently damaged, we believe today’s events are likely to put upward pressure on residual fuel oil and diesel cracks, LNG, UK natural gas and rice; downward pressure on naphtha cracks and Dubai spreads relative to other crude grades.”
Yet the thing we found more interesting than energy related bottlenecks was the disclosure toward the end of the report discussing the threat to the Japanese rice harvest: “In addition to the damage to energy infrastructure from the earthquake, the tsunami also impacted rice producing regions in Japan.
While Japanese rice inventories are large, this puts the 2011/12 crop production at risk and may in turn drive Japanese rice imports higher, posing upside risk to current prices.” Granted, Japan is not a big exporter of rice, but it is a top 10 consumer. Should the country’s consumption (which is estimated at around 9 million metric tons) need to be satisfied by a surge in imports, and with the price of rice already dependent on the margin on speculative money, this could be the catalyst that send the grain, which has plunged in price over the past month, finally break beyond any potential manipulative price suppression schemes.
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