What is in this article?:
- Commodity markets rebound after initial fall from Japan quake
- Market history after disasters
- Commodity prices are back on the rise after they fell quickly in reaction to the earthquake, tsunami and nuclear crisis in Japan, Purdue Extension agricultural economist Chris Hurt said.
- Japan is the fourth-largest buyer of agricultural products from the United States. usd estimates that Japan will spend $13 billion on U.S. commodities this year. It is the largest U.S. corn buyer at 580 million bushels annually, the largest pork buyer by volume at 1.28 billion pounds, the third-largest beef buyer by volume at 351 million pounds and the fourth-largest soybean buyer at 92 million bushels.
Market history after disasters
"Markets have considerable history observing the impacts of natural disasters around the globe, but nuclear disasters and their implications are much more uncertain," he said. "Markets often move lower as uncertainty rises."
Historically, markets have had a downward overreaction immediately following disasters but have recovered as situations become more certain. If the Japanese can control the nuclear crisis, the market effects could be minimal. If the crisis continues, it could hurt the Japanese economy and possibly economies worldwide.
"The first thing we need to look at is the potential impact on the Japanese economy and whether the events will slow overall world economic growth." Hurt said. "Slower world economic growth would result in weakened demand for agricultural products."
The Japanese economy accounts for about 9 percent of total world economic activity, but the situations in Japan could slow that in the short-term. In the long run, rebuilding will stimulate the economy.
Because Japan's economy is highly integrated with other major world economies, such as the U.S., the conditions will lead to disruptions in supply chains.
"The effects of supply chain disruption are more difficult to evaluate, but it could slow the rate of world economic growth a few tenths of a percent from the current International Monetary Fund projection of 4.4 percent world growth," Hurt said. "Those reductions likely will fall in the second and third quarters of 2011."