It was virus on/risk off time again on financial markets – although, some, ags at least showed a bit of resilience.
Wall Street shares stood 3.4% lower in late deals as worries over the Covid-19 coronavirus outbreak returned to the fore.
As CRM AgriCommodities noted, “nearly 97,000 cases have been confirmed worldwide of which 80,422 in China (+1,171 in the last five days), 6,088 in South Korea (+2,938 in the last five days) and 3,513 in Iran (+2,920 in the last five days).
“More than 3,000 cases are also confirmed in Italy of which 2,000 since the beginning of the month.”
Karl Setzer at AgriVisor said that “many countries have opted to inject money into their economies and cut interest rates to off-set economic losses from the virus.
“The question is how long countries can keep doing this if the outbreak continues to spread, which some health officials claim could be another several weeks, possibly months.
Coffee price plunge
Brent crude dropped 2.4% to $49.93 a barrel, while the haven of gold soared 2.2% to $1,672 an ounce.
Some ags fared even worse, with arabica coffee plunging by 6.0% to 111.35 cents per pound in New York for May delivery, little helped by a further drop in the real, which stood down 1.2% against the dollar, and earlier touched a fresh record low of $4.666 per $1.
(A weaker real cuts the value in dollar terms of assets in which Brazil is a major player.)
However, the bean has also lost its aura of resistance against coronavirus-caused demand losses, with the International Coffee Organization’s caution earlier this week that “Covid-19 presents considerable downside risk to global coffee consumption”.
The organisation flagged “fears over the effect Covid-19 might have on demand, particularly for out-of-home consumption”.
Raw sugar, another ag in which Brazil is the top exporter, eased by a more modest 0.4% to 13.42 cents a pound for May.
“As the number of countries where coronavirus has been reported increases and cases within countries rise, it is becoming apparent that it will be a while before we see a resumption of ‘normal’ trading conditions in financial and commodities markets,” Sucden Financial said.
Still, it noted too in sugar an “oversold market, with now-front-contract May erasing all gains since the beginning of the year”, headway which had been made largely on the weakened prospects for Indian and Thai output this season.
One support for sugar is that these expectations remain in place, and that price falls are theoretically having a pretty immediate impact in cutting sugar supply prospects, in cutting the viability of Indian exports, while also lowering prospects for Brazilian output in the 2020-21 cane crushing season which standards next month.
’Well below trade expectations’
In Chicago, soybeans, another ag largely exposed to Brazil and its currency, weakened too, by 1.1% to $8.97 a bushel for May, surrendering the psychologically important $9.00-a-bushel mark.
But that made it the worst performing of Chicago’s big-three contracts – a appeared to back ideas that there is some defence for ags able to show decent export demand.
Soybeans were also damned by weak US export sales data, which came in at 345,000 tonnes – marginally higher week on week but well below market forecasts of 500,000-1.00m tonnes.
“Soy export sales fall well below trade expectations,” noted Richard Feltes at RJ O’Brien.
“USDA export sales were ok for everything except for soybeans,” said Terry Reilly at Futures International.
In fact, for corn, US export sales last week, at 769,200 tonnes, were at least within the range of market forecasts of 700,000-1.20m tonnes, if below the 864,600 tonnes achieved the previous week.
Also somewhat supportive to the grain were, as Terry Reilly noted, rumours that China’s “Cofco bought US DDGs overnight”.
Some talk had Chinese buyers looking for DDGs – or distillers’ grains, a byproduct of corn ethanol manufacture used as a high-protein animal feed ingredient – for delivery in the second and third quarters.
Whatever, corn fared significantly than many other assets, in falling by 0.8% to $3.81 ¾ a bushel for May delivery.
And Chicago wheat, whose somewhat improved market dynamics Agrimoney discussed earlier, actually managed gains, if by a modest 0.1% to settle at $5.18 ¾ a bushel for May.
Besides factors such as funds seen running low on ammunition, in terms of long bets, to sell, US export sales data for last week were decent, at 542,400 tonnes, “up 42% from the previous week and 27% from the prior four-week average”, as the USDA calculated.
They were also at the top end of the range of 350,000-600,000 tonnes that investors had expected (and included toop substantial trade from coronavirus-hit South Korea).
“Wheat numbers are respectable,” said Benson Quinn Commodities, with the data spurring hopes that US supplies were after all becoming more competitive.
The idea of demand providing some protection against selling extended even to cotton – which as an industrial ag, has been more vulnerable than grains to following shares lower in virus on/risk off selling.
This time, New York cotton futures for May gained 0.6% to 63.35 cents a pound despite the drop in the S&P 500, with the fibre offered support by decent US export sales last week of 395,500 running bales of upland – the highest for 2019-20 – plus a further 9,100 running bales.
Actual exports of upland cotton last week, at 478,200 running bales, were a marketing-year high too.
“Both sales and shipments were well ahead of the average weekly pace required to meet the USDA’s 16.5m-bale export target” for the whole of 2019-20, said Louis Rose at Rose Commodity Group.
“We think that the latest figures are bullish at current trading levels.”