ao link

Analysis

Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

ANALYSIS: America's $2 trillion stimulus will help boost agri prices

TwitterLinkedineCard

Now that the US has passed its mammoth stimulus package of $2 trillion the biggest bazooka of them all has been fired.

 

Although the scale of the package is unprecedented, the bazooka might need re-loading in the coming weeks, as the spread of Covid-19 progressively shuts down US economic activity and creates greater public alarm.

 

According to the chief executive of the global crude oil trading company Vitol, current estimates are a drop in annual demand of around 5m barrels per day.

 

He said today that the demand halt "is only hitting the markets now". One benchmark, Brent crude, was this morning down by 1.66% at $26.70 a barrel.

 

Currencies other than the US dollar have recovered slightly, but against a basket of currencies the US dollar has eased slightly, by 0.2%. Agricultural imports have thus become fractionally cheaper.

 

Cash in the pockets of consumers will help food sales

 

The US stimulus will put more cash in the pockets of consumers - each adult is to get a direct one-off payment of $1,200 and each child $500. Other elements of the stimulus package include an "employee retention" tax credit to cover 50% of workers’ pay.

 

American consumers are thus going to be cushioned from the worst blows of the economic downturn.

 

Some of this money will undoubtedly go to food purchases.

 

Local food sales in the US are annually worth about $12bn, according to the US congressional research service. Academic researchers estimate local and regional US food sales from March to May will drop by some $689m, as consumers stay home.

 

Agri futures will rise as a consequence of stimulus packages

 

We have already seen some encouraging signs of revival - China bought, for example, more than 6m tonnes of US soybeans in January and February, six times the amount bought during the same period in 2019.

 

China’s total soybean imports in January and February were up more than 14% year-on-year.

 

The watchword right now is patience. The global economy is still going through its shock. Until the Covid-19 virus panic shows clear signs of ebbing, and the Russian-Saudi Arabia crude oil struggle ceases, we are living though a febrile time. There are lags across many sectors.

 

But there is one certainty - the massive stimulus packages will feed inflation. Including the prices of all agri futures.

TwitterLinkedineCard
Related Stories

Producer, merchant positions in ags for week to April 13

Markets Extra lists the latest official data on commercial positions in ag commodity derivatives

Hedge fund positions in numbers for week to April 13

Markets Extra lists the latest official data on hedge fund positions in ag commodity derivatives, and how they have changed week on week

Evening markets: Grains suffer touch of late-week profit taking

The likes of corn and wheat trade lower in closing deals of a positive week. But the vegetable oil complex, and canola, stay strong

Failed hold-outs may foster dairy price gains at next week's GDT auction

Futures prices suggest modest gains in the offing at Tuesday’s GlobalDairyTrade auction - for whole milk powder, at least
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2021

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069