Soviet Accident Triggers Rally on Commodities Markets
LONDON (AP) _ The nuclear accident in the Ukraine, one of the Soviet Union’s biggest farming regions, has prompted a sharp rise in wheat and livestock prices on world markets, commodities analysts said Thursday.
They said that it is too early to assess the extent of radioactive pollution in the Ukraine but that heavy fallout could damage Soviet agricultural output for years to come. Sweden and Denmark have already banned food imports from the Soviet Union and some Eastern European countries.
In the absence of any word from the Soviet Union on possible damage to crops and herds, commodities markets have been gripped by speculation that the Soviets will be forced to increase imports of grain, sugar and milk products.
″The market is going through the roof,″ said Bill Demaria, an analyst with the London-based International Wheat Council. ″We haven’t seen excitement like this for months and months.″
After three days of frantic trading in the United States, prices of future grain contracts began to stabilize Thursday on the Chicago Board of Trade.
The Ukraine, an area about the size of Texas in the southwest corner of the Soviet Union, is the country’s third-most important farming region. According International Wheat Council, Ukrainian farms produce about one-fifth of all grain grown in the country and also about one-fifth of its cattle and pigs.
But most of the farmland lies to the south of Chernobyl nuclear power plant, and Western press reports indicate the radioactive cloud released in last weekend’s accident blew to the north, away from the most important crop- producing areas.
However, in Washington, the U.S. Agriculture Department reported that shifting winds carried the radioactive plume southwestward Thursday, for the first time affecting some of the Soviet Union’s richest cropland.
Norton D. Strommen, chief meteorologist for the department’s World Agriculture Outlook Board, said the new weather pattern, expected to remain in place for at least 24 to 48 hours, would carry fallout over the western Ukraine, one of the most productive Soviet winter wheat areas.
The winds also took the plume into Romania, Hungary, eastern Czechoslovakia and Austria, Strommen said, while emphasizing that scientists have no hard data about the nature or severity of any crop and livestock contamination.
Before that news and just after the initial sketchy reports Monday, wheat prices, which had been falling steadily, shot up immediately on the Chicago futures market. Last Friday, before the accident, wheat for May delivery was quoted at $2.89 a bushel. By early Thursday, it had jumped to $3.28. It later closed at $3.12 a bushel.
Corn markets have also benefited from expectations of an increase in cereal exports to the Soviet Union and Poland.
Speculation over possible contamination of Soviet livestock has similarly driven up prices on the Chicago meat markets, which had been girding for a sharp drop in cattle prices because of the U.S. government’s recently announced dairy buyout programs.
Sugar futures rose sharply in New York early this week - the Soviet Union is the world’s largest producer of sugar beet - but traders said the market had been rising for months and the rally could not be solely attributed to the nuclear accident.
Analysts in London and Chicago attributed the commodities rally mainly to speculative buying and said it could fizzle out.
″I think the prices of the past few days were based more on conjecture and fears and panic, rather than any hard evidence,″ said Susan Hackman, a grain analyst for Agri Analysis Inc. of Chicago. ″That’s what markets do - they feed on uncertainty.″
Chip Hatcher, a livestock analyst for Chicago brokers Geldermann Inc., also said the market was dealing with uncertainty. ″Who knows where the market is headed because who knows the extent of damage that’s been done (to Soviet livestock)?″ he said.
He said the meat market was ″simply operating out of fear. I think the market will be extremely choppy and show very wide ranges over the next few days. The more immediate feeling is, perhaps we’ve overdone the move on the upside given the information we’ve got.″
The Soviet Union is by far the world’s biggest cereal importer, although imports fell last year after an unusually good harvest. The government has not published data on grain production since 1979, but the International Wheat Council estimates the Soviets produced 191 million metric tons of wheat and course grains last year.
Not taking the nuclear accident into account, the country is expected to import 32 million metric tons of grain during 1985-86.
The wheat council says there is enough grain stockpiled in the United States and the European Common Market to supply the Soviet Union and Poland this year. But it says a problem could arise if there is heavy contamination of farmland, greatly increasing demand for imported grain in the future.
Chris Pack, a sugar analyst for London commodities brokers Czarnikow, said the worst effect of the accident could be radioactive contamination of water. If fallout has entered major waterways near the Chernobyl plant, it could be carried over thousands of miles and across the country’s borders.