If it really is always darkest before dawn, well, there would be a chance that sunrise isn’t too far away.
Days don’t get much worse than Thursday, in terms of heighted losses for risk assets.
“It has been another brutal day,” said CRM AgriCommodities, with some blaming the stampede away from risk assets to panic after US President Donald Trump overnight revealed a ban on travel from Europe to the US.
“This was the most expensive speech in history,” according to Pictet, although others termed the curb a sensible move in the battle to quell the spread of coronavirus.
To give the tally of doom, shares stood 7.6% lower on Wall Street in late deals, even after the Federal Reserve said it would inject trillions of dollars in short-term funding to steady markets.
Stocks tumbled 10.9% at the close in London, and by 12.2% in Frankfurt.
In energy markets, Brent crude was 8.1% down at $32.89 a barrel (although still remaining above Monday’s low) while gasoil dropped by 9.0%, and RBOB gasoline stood 19.6% down at $0.8917 per gallon, approaching its lowest levels since 2008.
That also put it at a rare and substantial discount to ethanol, which for April traded down 3.1% at $1.181 per gallon.
Price prospects for dollar-denominated commodities were little helped by a 1.0% gain in the dollar against a basket of currencies, making them less competitive as exports.
That currency move, or rather the euro’s drop of 0.7% against the dollar, was reflected in one of the rare upward moves by ags on Thursday – that of Paris soft milling wheat, which for May gained 0.3% to close at E177.75 a tonne.
Paris wheat was also helped by an Algerian purchase of wheat, of some 600,000 tonnes, which was expected to be purchased largely from France.
And Strategie Grains upped its forecast for EU soft wheat exports in 2019-20 by 600,000 tonnes to 31.2m tonnes – albeit reflecting improved hopes for Germany, with the French estimate receiving a downgrade, to 12.8m tonnes.
That nonetheless remains a touch above the (upgraded) 12.7m-tonne figure that official bureau FranceAgriMer revealed on Wednesday.
‘Demand may even increase’
And, to be fair, even Chicago soft red winter wheat, the world bellwether, didn’t perform that badly in shedding 1.4% to end at $5.05 ½ a bushel for May (although that did represent a five-month closing low for the contract).
US wheat export sales for last week, at 452,300 tonnes, weren’t bad, comfortably within market expectations of 200,000-600,000 tonnes.
The figure included 169,316 tonnes of hard red winter wheat, a four-week high. And Kansas City hard red winter wheat futures for May eased 0.6% to $4.32 ¾ a bushel.
Commerzbank put the case for relatively stability in wheat prices, saying that “wheat demand is likely to be hit less hard by the virus than demand for many industrial commodities.
“After all, most of wheat demand is generated by foods such as bread, biscuits and pasta, which will also remain in basic demand even during the crisis.
“In fact, the demand for wheat from the food industry may even increase in the short term in order to refill the empty shelves in the supermarkets as shoppers stockpile.”
Petrobras price cut
By contrast, ags more closely linked to energy markets via biofuels suffered particular selling, with New York raw sugar for May, for instance, plunging by 5.2% to 11.62 cents a pound, a contract closing low, and the weakest finish for a spot lot since September.
The contract is now down 10.8% just for this week.
As Jack Scoville at Price Futures noted, “the weaker petroleum futures make higher priced ethanol that much more expensive to blend and cuts demand.
“That makes more sugarcane available for processing into sugar” in countries such as Brazil, where many mills can process cane into either sweetener or biofuel.
In fact, in Brazil, state-controlled oil giant Petrobras cut fuel prices at refineries by R$0.16 per litre for gasoline, so putting downward pressure on prices of rival ethanol, while lowering diesel prices by R$0.125 per litre - a negative for values of biodiesel of feedstocks, ie vegetable oils, used to make it.
In Chicago, soyoil for May tanked 4.6% to 26.38 a pound, a fresh contract closing low, after palm oil for May overnight dropped 3.5% to 2,277 ringgit a tonne in Kuala Lumpur.
‘Who’s paying any attention?’
Cotton – an industrial ag, so lacking food crops’ defensive qualities, and one too a rival of the likes of polyester, so undermined by oil price weakness – was little protected either, and tumbled by 3.0% to 59.70 cents a pound in New York for May.
That took the lot back below 60 cents a pound for the first time in six months, with selling accelerating after the lot broke through technical resistance at the end-February low of 60.18 cents a pound.
US cotton export sales data for last week were actually excellent, at 484,229 running bales for upland - the highest figure since latest 2017.
Actual exports were decent too, at 424,633 running bales, if down more than 50,000 running bales week on week.
Louis Rose at Rose Commodity Group said that “the latest figures are bullish at current trading levels, but who’s paying any attention to fundamental supply and demand data?”
And back in Chicago, corn futures dropped too, by 2.5% to $3.65 ¾ a bushel for May, a contract closing low.
This despite some strong US export sales data for last week, at 1.47m tonnes, nearly twice the level of the week before, and well ahead of market expectations of 600,000-1.20m tonnes.
However, the weak energy markets have overshadowed another source of demand for US supplies, for making ethanol.
Furthermore, rains are set to revive Argentine and Brazilian crops, and many investors appear relaxed over wetness which threatens to slow early US sowings.
“The market knows that large equipment allows farmers to catch up quickly,” said Richard Feltes at RJ O’Brien.
“I suspect we’ll need to see continuation of wet pattern into the last half of April before fear of extended planting delays attracts fresh buying.”
Soybean futures for May fell by a more modest 1.8% to $8.59 ½ a bushel, weighed by soyoil – but finding some support from soymeal, which proved one of the rare gainers, in adding 0.4% to $302.80 a short ton in Chicago for May.
Spreading against soyoil is, of course, a common strategy, meaning that meal was well placed to benefit from vegetable oil market weakness.
But there is more to meal’s resilience than that, with worries remaining over Argentine exports, after the bankruptcy of domestic crusher Vincentin, and with the country having raised export levies on soy shipments.
Furthermore, there is some talk of seasonal outages at some US ethanol plants, so cutting output and availability of distillers’ grains, a rival to soymeal as a high protein feed ingredient.