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Coronavirus casts shadow over global markets

Coronavirus is starting to have an effect on global agricultural commodities, largely because of a drop in oil prices.

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Coronavirus casts shadow over global markets

The shutting down of Chinese cities to stop the spread of the virus and the impact on the wider economy could knock at least one per cent off the country’s economy this quarter, economists in the country calculate.

 

“Because China accounts for 18 per cent of the global economy, any slowdown in its economy has a much wider impact,” said Carlos Mera, senior agri commodity analyst at Rabobank.

 

“Oil prices have fallen and in response palm oil values have dropped by 16 per cent in the last three weeks of January. Meanwhile, Brazilian sugar mills are likely to switch more sugarcane towards sugar production rather than ethanol in the harvest season starting from April, as international energy demand slips.”

 

Mr Mera said there is not immediate evidence of reduced demand for imported grains and other products but the shutting down of cities and the extension of the Chinese New Year holiday are likely to have an impact.


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Lower oil prices may keep lid on cost increasesLower oil prices may keep lid on cost increases

“If people cannot go to coffee shops and restaurants there will be a temporary shift on how people consume, but we do not expect a decline in overall consumption levels for the major agricultural commodities.

 

"For the time being, retail pork prices in China are still at or near record levels and we expect China to resume buying US and global agricultural products as soon as the lunar new year break comes to an end.”

 

Benjamin Bodart of CRM AgriCommodities believed the impact of the virus could have a bigger effect than the recently signed Chinese/US trade deal: “The full impact of the coronavirus, on grain demand is still unknown but fears over a steep contraction in the Chinese GDP spread very rapidly and overshadowed the recently signed Phase 1 US-China trade deal agreement.”

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