Coffee and biscuits proved the diet for investors to sidestep the market tumble to start the week, although to be fair, ags widely proved less vulnerable than some other assets.
Not that agricultural commodities exactly enjoyed a red letter day, with the Bcom ag subindex down 1.4% in late deals, looking set for its weakest finish in six months.
But that was a more resilient performance than many other assets could manage as the collapse in oil prices - with Brent crude standing 10% lower at $36.21 a barrel, looking poised for its lowest close in four years – overshadowing markets overall.
Wall Street stocks, as measured by the S&P 500 index, stood down 5.9%, after plunging 7% early on and triggering the so-called “circuit breaker” introduced in 2013 in an effort to offer the market some protection against panic-driven price plunges.
London shares closed down 7.7%, and Frankfurt ones by 7.9%.
By contrast, the flood of money into government debt sent the 10-year US Treasury bond yield to a record low of 0.318% before it rebounded back above 0.5%.
Ags had some notable losers too, such as some of those linked to energy markets via biofuels.
The slump in crude prices – a reflection of an oil price war kicked off by Saudi Arabia after Russia rejected Opec overtures on production cuts – sent gasoil prices (influential for biodiesel feedstocks, ie vegetable oils) down 13.4%, although ethanol lost a more modest 2.4% in Chicago, to stand at $1.211 a gallon for April.
Kuala Lumpur palm oil for May slumped by 4.9% to 2,332 ringgit a tonne, although that was half the loss at the intraday low.
Chicago soyoil for May stood 3.4% lower at 27.76 cents a pound, looking set for what would be a contract closing low.
Sugar vs ethanol
In New York, raw sugar for May stood down 2.5% at 12.69 cents a pound in late trading, with weaker ethanol prices boosting the appeal to Brazilian mills of turning cane into the sweetener rather than biofuel.
Sure, “on the face of it sugar can go its own way for some time”, given that the Brazilian 2020-21 cane crush will not start in earnest until May, meaning that the ethanol versus sugar consideration is not so active for now, said Marex Spectron.
However, “if crude and RBOB gasoline stay where they are, then at some time the sugar price is going to have to go below 12 cents a pound?, 11? 10? and stay there for long enough to prevent Brazilian mills from making ’too much’ sugar”, the trading house added.
Ricardo Mussa at Brazil’s Raizen, the world’s largest sugar producer, backed ideas of the country’s mills making more of the sweetener, saying that “there was already the intention to raise sugar production this year, and oil’s price fall boosts that plan”.
‘Even more aggressive’
But also in New York, arabica coffee for May recovered from early losses to close up 1.7% at 109.20 cents a pound.
And this despite a further loss in the Brazilian real, which shed a further 2.9% against the dollar to hit a fresh record low.
“The real’s loss in value this year will make Brazilian producers even more aggressive in marketing their coffee supplies to foreign customers, particularly with trade forecasts calling for their 2020-21 ‘on-year’ crop to come in at 65m bags or higher,” said ADM Investor Services.
That said, on the plus side, Massimo Zanetti Beverage Group has sought to reassure investors over a loss of demand to coronavirus, while Colombia’s Fedecafe producers’ group has forecast domestic output at 14.0m bags, down 800,000 bags year on year, so offsetting a little bit of the Brazilian upside.
Soft red winter wheat, meanwhile, used largely for making biscuits, stood up 0.8% at $5.19 ¾ a bushel in Chicago for May delivery.
A 1.2% slide in the dollar against a basket of currencies was one factor in its favour, boosting the competitiveness of US exports against those from, say, the eurozone, with the euro gaining 1.0% against the greenback (and sterling adding 0.5%).
Paris wheat futures for May indeed ended down 1.8% at 178.50 a tonne, while London ones closed 1.2% lower at £147.75 a tonne.
Also supportive to Chicago prices was data on Friday showing that hedge funds had already had a large clearout of their net long positions in the contract, which had been seen as a weight for values.
And while the rouble crumpled, falling 9.5% even against the tumbling dollar, so boosting the competitiveness of Russia’s wheat exports, there were fears that this boost could be negated by an revival of the country’s export tax.
‘Less than perfect’
Rival grain corn stood 1.3% lower at $3.71 a bushel for May in late deals in Chicago, undermined by its links to ethanol, but finding some other supportive news, including persistent talk of sales of US (corn-derived) distillers’ grains to China.
“Some talk of DDGs business and hard red spring wheat to China could be supportive on any other day,” said Benson Quinn Commodities.
Richard Feltes at RJ O’Brien noted “another day of zero deliveries” against the expiring March Chicago corn contract, as well as the wheat one, suggesting minimal temptation for physical selling at current prices.
Karl Setzer at AgriVisor noted that weather “conditions in South America remain less than perfect for both harvest and planting”, with dryness remaining an issue in parts of Argentina, for instance.
Soybeans for May stood 2.4% down at $8.69 ½ a bushel in closing trades, weighed by the decline in soyoil prices, but also by the investor positioning data showing that funds had already closed a substantial number of short bets in the oilseed.
That limited the potential for further such support.
The decline came despite the USDA reporting the sale of 123,500 tonnes of US soybean exports to an “unknown” import destination.