Agricultural commodities, like many other risk assets, fell on Monday under the weight of coronavirus concerns, although it was actually a less-exposed market that fared the worst.
Shares stood 1.3% lower on Wall Street in late deals, after closing down 2.3% in London and by 2.7% in Frankfurt as the death toll in China from the virus rose above 80, including the first fatality in Beijing.
More than 50 cases have been confirmed outside China, including in Australia, France and the US.
Brent crude stood 2.2% lower at $59.35 a barrel.
“World markets are reacting sharply lower as the economic impact of China lockdowns, closed businesses, factory shutdowns and travel bans will be felt all over the globe,” said Benson Quinn Commodities.
“Fears of the disease have put pressure on commodities across the board,” said CHS Hedging – although precious metals, perceived as safe havens, naturally bucked that trend, with gold up 0.6% at $1,580 per ounce.
Commerzbank said that “there are fears that demand will suffer if many Chinese avoid public spaces as much as possible and reduce their shopping, restaurant visits and festivities”.
Ags, as measured by the Bcom ag subindex, traded 1.0% lower in late deals.
New York arabica coffee fared a lot worse than that, closing down 3.2% at 106.60 cents a pound for March delivery, a its weakest finish in two months, and one which took it back below its 200-day moving average.
This despite not being so exposed to China, a relatively minor coffee market.
Technical factors looked part of the problem, with the price fall accelerating once the 200-day moving average, at 109.15 cents a pound, was breached.
Furthermore, there seemed to be some broad withdrawal from coffee going on, with London robusta coffee for March ending up 0.7% at $1,328 a tonne, in what looked like the result of exits from short robusta-long arabica spreads which have been popular of late.
The real did little to help arabica prices in falling by 0.6% against the dollar, so cutting the value in dollar terms of assets, such as arabica, in which Brazil is the top exporter.
‘Disrupt feed demand’
Among grains, Chicago corn futures proved particularly weak, ending down 1.7% at $3.80 ½ a bushel for March delivery, slumping back below its 40-day and 50-day moving averages.
“Corn futures are lower on fears the virus spreading across China will disrupt feed demand,” said Terry Reilly at Futures International.
“Corn has tumbled through all key moving averages and looks head toward support at $3.74 ½ a bushel, a chart gap from the December contract expiration,” said Benson Quinn Commodities mid-session.
In fact, the lot got as low as $3.77 ¼ a bushel before finding some bounce, although not enough to prevent another chart gap emerging from $3.84 ¾ to $3.86 ½ a bushel.
The decline came despite some further good news on the export front, with the US Department of Agriculture revealing US exports of 668,559 tonnes last week, around the middle of the range of market expectations of 500,000-900,000 tonnes.
The figure represented a vast improvement on the 397,000 tonnes shipped the previous week.
Furthermore, the USDA unveiled the sale of 111,252 tonnes of US corn for delivery to Japan in 2020-21.
Karl Setzer, meanwhile, reminded of the “concerns on the quality of US corn in the global market,” after a wet autumn harvest, “and this is a factor that will only become more discussed in the future.
“The real question with quality is how bad it may get when there is no more old crop to blend in.”
‘In the market very soon’
Corn in fact ended up doing markedly worse than rival grain wheat, which also showed hefty losses at once stage, of 2.4% in Chicago for March delivery, before recovering to end at $5.72 ¼ a bushel, only 0.1% down on the day.
The late recovery was helped by strength in Russian prices, which SovEcon reported up $5 a tonne last week to $231 a tonne for 12.5% protein supplies for export from deep sea ports – the highest price since February last year.
Meanwhile, the Egyptian government said that the country has enough wheat reserves to last until the end of June – the kind of announcement the top wheat-importing country often makes before its grain authority, Gasc, issues a tender.
“It sounds like Gasc will be in the wheat market very soon,” said CRM AgriCommodities.
It was also a help that Paris soft milling wheat for March closed down a relatively modest 0.6% at E194.25 a tonne, despite an unimpressive week for European Union soft wheat exports, at 123,000 tonnes.
Is this a sign of the French industrial action over pension reform indeed squeezing supplies at ports?
Meal vs oil
Back in Chicago, soybean futures for March ended 0.5% lower at $8.97 ¼ a bushel, its first close below $9.00 a bushel in seven week.
Still, the close could have been worse, representing as it did quite some recover from a low of $8.88 ¼ a bushel touched earlier.
Soybeans remained depressed by soyoil, which closed down 1.3% at 31.52 cents a pound in Chicago for March delivery, a big rebound from the intraday low of 30.72 cents a pound reached earlier, but not enough to prevent the contract’s first finish below its 100-day moving average in four months.
However, soymeal, the other soybean processing product, remained resolute, in ending just 0.2% lower at $297.80 a short ton for March.
As Agrimoney has been discussing, the feed ingredient has found some support from signs of strong demand for US supplies, with Argentine giant Vicentin suffering financial hardship.
US export sales of 641,919 for the week to January, as revealed by official data on Friday, were the highest for any week since October 2013.