The world’s coronavirus outbreak left its mark all over the agricultural commodity sector last month.
It was demand, rather than supply, considerations which really told in ag markets. Ie, how much of a threat is the disease to consumption prospects.
In fact, ags as food items did far relatively well, with the Bcom ag subindex, in falling just 1.7% over February, far outperforming other commodities, as measured by the Bcom (down 5.2%), let alone shares, as represented by the S&P 500 index (down 8.4%).
As US-based Steiner Consulting put it on Friday, “despite all the panic of the impending pandemic… consumers still require three meals a day”.
Still, the overall resilience in ags disguised some wide variations, with cotton, for instance, as an industrial commodity , performing worse than food-based ones.
It is also linked to the (particularly poorly-performing) market for oil, the origin of rival fibres such as polyester, costs of which stand to decline as crude depreciates.
Similarly, palm oil was a big loser too, with weakness in energy markets a setback for a commodity which built up a late-2019 head of steam in particular on ideas of strong demand from biodiesel plants.
Nor does the demand from China, also a key feature of last year’s rally (as weaker domestic crushing needs, in the face of a swine fever-shrunken pig herd, cut output of rival soyoil), look like being so buoyant either. And palm oil orders from India, in a political spat with exporter Malaysia, look like drying up too.
Meanwhile, with China the top dairy importer (as it is of cotton as well, of course), whole milk powder prices suffered too, despite dryness undermining prospects for milk output in key exporter New Zealand.
‘Temporary and negligible’
On the more positive side, lean hogs proved particularly resilient, with Steiner Consulting noting that (in the US anyway) less pork than beef is sold through foodservice, making it less vulnerable to consumer decisions to dine at home amid the outbreak.
“While pork use at foodservice has increased in recent years, it still tends to be a retail item,” with an estimated 70% of fresh pork sold through retail channels.
And coffee demand is seen as less vulnerable too to coronavirus, with China, the epicentre of the outbreak, not a huge consumer yet.
As Rabobank saw it, “the effect of coronavirus on [coffee] demand is likely temporary and negligible”.
Whether that holds if the disease spreads to bigger consuming countries, and discourages trips to coffee bars…
Price changes below given on a spot contract basis, except palm oil on a third-in contract basis. Some non-ags are included for comparison purposes. For Janaury’s price performance table, click here.
|Contract||Month-end price||Change on month||Change for 2020
|Lean hogs (Chicago)||62.275 cents per pound||9.0%||-12.8%|
|Arabica coffee (New York)||110.10 cents per pound||7.3%||-15.1%|
|Soymeal (Chicago)||$298.60 per short ton||2.6%||-0.4%|
|Soybeans (Chicago)||$8.83 1/2 per bushel||1.3%||-6.3%|
|Canola (Winnipeg)||Can$452.80 per tonne||0.6%||-3.1%|
|Gold||1584.74 per Troy ounce||-0.3%||4.5%|
|Cocoa (New York)||$2,760 per tonne||-0.6%||8.7%|
|Raw sugar (New York)||14.46 cents per pound||-1.0%||7.7%|
|Cocoa (London)||£1,926 per tonne||-1.5%||5.9%|
|Soft milling wheat (Paris)||E187.50 per tonne||-1.8%||-0.7%|
|Feed wheat (London)||£146.50 per tonne||-2.0%||0.0%|
|White sugar (London)||$396.60 per tonne||-2.4%||10.4%|
|Rapeseed (Paris)||E380.25 per tonne||-3.1%||-7.6%|
|Feeder cattle (Chicago)||131.275 cents per pound||-3.2%||-9.7%|
|Corn (Chicago)||$3.66 1/2 per bushel||-3.9%||-5.5%|
|Hard red spring wheat (Minneapolis)||$5.11 1/4 per bushel||-4.2%||-8.9%|
|Hard red winter wheat (Kansas City)||$4.45 1/2 per bushel||-4.3%||-8.3%|
|Soft red winter wheat (Chicago)||$5.29 per bushel||-4.5%||-5.3%|
|Soyoil (Chicago)||28.31 cents per pound||-5.4%||-17.9%|
|Robusta coffee (London)||$1,257 per tonne||-5.8%||-7.2%|
|Whole milk powder (NZX)||$2,820 per tonne||-6.0%||-8.1%|
|Live cattle (Chicago)||112.70 cents per pound||-7.1%||-10.5%|
|Cotton (New York)||61.59 cents per pound||-8.8%||-10.8%|
|Palm oil (Kuala Lumpur)||2,319 ringgit per tonne||-10.9%||-24.0%|
|Brent crude||$49.67 per barrel||-14.6%||-24.7%|
|Month end price for spot contract, except benchmark contract for palm oil. Dollar reported against a trade-weighted index. Spot contract values as reported by Reuters