Another push, and ag values will be their lowest in at least 30 years.
At least, as measured by the Bcom ag subindex, which dipped 1.4% to fall just below 37 points on Thursday. Its lowest ever, since it started in 1991, is the 36.36 points recorded last May.
The problem, naturally, was the concern over the economic hit presented by coronavirus as its spread continues outside China – where it was blamed for an 82% plunge in sales of passenger vehicles last month.
Among latest people to contract the disease is actor Tom Hanks (in Australia). Among latest moves to prevent its spread is US President Donald Trump’s announcement of a ban on citizens of many European nations (although not including Ireland and the UK) from entering the US for 30 days.
“We are at a critical time in the fight against the virus. We made a life-saving move with early action on China, now we must take the same action with Europe,” Mr Trump said.
‘Driving markets crazy’
The broader market impact was pretty predictable.
On share markets, the 4.9% tumble in Wall Street’s S&P 500 index was echoed in markets elsewhere, with Hong Kong shares shedding 3.7%, and Tokyo ones 4.4%, while London’s FTSE 100 traded 5.6% lower in early deals, and Frank’s Dax down 6.4%.
Brent crude stood 5.2% down at $33.94 a barrel as of 09:50 UK time (04:50 Chicago time), although still remaining above Monday’s four-year low of $31.02 a barrel, with the haven of gold up 0.6% at $1,644 an ounce.
“Coronavirus fears are driving markets crazy,” said Terry Reilly at Futures International.
‘Fear and panic’
“It’s fear and panic on Wall Street,” said Mike Mawdsley at First Choice Commodities.
“The pandemic has people wondering if everything will shut down at some point. Fear is the market moving force.”
Indeed, what is making matters worse is, as Commonwealth Bank of Australia put it, “it’s no longer recession risk that’s driving markets lower - instead investors are concerned that this whole thing could soon turn into a liquidity crisis”.
This means that “agri commodity prices are thus ‘in play’ again because a liquidity problem is a new problem”, spreading the issue from just calculations of levels of demand loss to the likes of counterparty risk and whether buyers can actually pay.
This on top for ags of the logistical hiccups being caused by the virus too.
Mr Reilly flagged a report that, all things in, “US seaports could see a slowdown of as much as 20% in February, March and much of April as the coronavirus outbreak cancels cargo sailings and some dock and warehouse workers are sent home”.
All this adds even more focus to the US export sales (and export volume) report for last week due later on Thursday, offering insight into exactly what is going on.
For wheat, export sales last week are expected at 200,000-600,000 tonnes for 2019-20, compared with 542,395 tonnes last time.
For corn, the figure is expected at 600,000-1.20m tonnes, with most forecasters seeing an increase from the 769,205 tonnes last time.
And for soybeans, the sales number is forecast at 400,000-800,000 tonnes, up from 345,039 tonnes the previous week.
For soybeans, the data follow (but will not include yet) three successive days of announcements by the USDA of substantial export sales (to an “unknown” importer) – a trend which has boosted demand hopes.
“Many traders thinking China is buying a few US Pacific North West cargos as rains in Brazil add to the capacity problems Brazil is currently experiencing,” said Benson Quinn Commodities.
“Call it sympathy logistics purchasing by the Chinese.”
The broker also in the soy complex noted “talk that Argentina still has trouble crushing soybeans, with large crusher still offline with money trouble”.
Such ideas were also reported by ADM Investor Services, which flagged “talk of lower Argentina crush and soymeal supply, although adding: “Still for June, Brazil soybean export prices are lower than US.”
More supportively for Chicago prices, it also noted that “some feel parts of Brazil and Argentina soybean growing areas could use additional rains to meet trade crop estimates”.
However, against Thursday’s macro backdrop, Chicago soybean futures for May shed 1.4% to $8.60 ¾ a bushel, hitting a 10-month low for the contract.
Soyoil, linked to energy markets via is use in making biodiesel, plunged 2.5% to 26.83 cents a pound for May delivery, with rival palm oil posing similar losses in Kuala Lumpur, of 2.4% to 2,302 ringgit a tonne for May.
‘Heavy rains are forecast’
Corn was lower too, albeit with a little less enthusiasm, down by 0.9% at $3.71 a bushel for May
For corn too, “several private firms are lowering their expectations on crop sizes following the drought that is impacting both southern Brazil and Argentina”, Karl Setzer at AgriVisor noted.
Furthermore on the weather theme, he noted that “trade is shifting focus to the US Delta where the spring planting season is getting underway.
“Heavy rains are forecast for parts of the Delta which could easily delay plantings if they continue. We are already hearing reports of flooding in the region.”
Black Sea vs US
Chicago wheat futures May, meanwhile, shed 1.9% to $5.03 ¼ a bushel, despite evidence of end user buying, with Tunisia purchasing 125,000 tonnes on Wednesday, and Algeria holding a tender.
But whether US prices are low enough to win much of this trade…
“Regarding the latest tender from Algeria, even if the origins are optional, it is very likely that France should be the main supplier,” Agritel said, also noting declines in former Soviet Union prices.
“Spot prices for agricultural commodities for Black Sea origins have continued the downward trend initiated for almost two months now,” the analysis group said, adding that “it is for wheat that the FOB quotes drop the most, by $4 a tonne since the beginning of the week whether for Ukrainian or Russian origins.
“The prices for the next campaign are following this decline. Most of Ukrainian traders offer $170 a tonne in wheat, $401 a tonne in rapeseed and $153 a tonne in corn for harvest deliveries to ports.”
Benson Quinn Commodities said: “Russian Black sea values continue to weaken,” with the rouble only adding to the origin’s competitiveness, declining by 1.6% against the dollar in early trading to 74.35 per $1, returning close to four-year lows reached at the start of the week.
In New York, cotton’s resolve crumbled, after a relatively resilient display this month for an industrial commodity, deemed more sensitive to world economic woes.
The May contract shed 1.7% to 60.53 cents a pound.
“The larger, macro picture is still far from settled and we still view cotton prices as vulnerable,” said Tobin Gorey at Commonwealth Bank of Australia.
Key for trading later will be weekly US export sales data, which have been on a strong run for cotton.
Furthermore, from a technical perspective, traders will be watching to see if the contract can stay above a late-February low of 60.18 cents a pound, which has appeared to offer some resistance to downward price moves.