Global ag. prices dip, traders question China-US trade on virus spread

Agricultural commodities trading on US and Chinese exchanges fell sharply early Monday as fears that a lockdown across major Chinese cities to contain a virus outbreak would hit demand for US meat and energy.

Brent crude oil futures fell more than 3% to $58.90/bbl, with front month soyoil futures in Chicago down 3.9% to 30.79 c/lb after Chinese officials said over the weekend that the potentially fatal coronavirus is not under control.

Soybean futures on the Chicago Mercantile Exchange were down 1.3% to a six-week low of $8.90/bu, corn was down 1.9% to a near two-week low of $3.79/bu and key wheat contracts were down about 2% to three-week lows.

Soymeal futures on Dalian are at a seven-month low.

By 1800 London time, soybean, soyoil and soymeal futures recovered some ground trading 1%, 2.5% and 0.7% lower from Friday, respectively, while corn drifted further trading 2.4% lower and Brent crude oil futures were mostly unmoved from early trade.

“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,” said German bank Commerzbank in a release.

“It’s the coronavirus scare. Soybeans and bean oil both are down heavily and gold is up about $10/mt. This shows that traders and investors are panicking and pulling out of agri and moving in gold,” one market source told Agricensus.

Over the weekend, Chinese officials said the death toll had risen to 81 of 2,700 confirmed cases, although there is talk of more than 10,000 people being hospitalised with symptoms.

There are now nine cities in China that are under various different modes of isolation, dampening demand at Chinese New Year for meat and fuel when typical consumption of food rises.

More acutely, the market is now raising concerns about whether China will be able to meet pledges to buy $40-50 billion of US agricultural goods made under the phase-one trade deal signed last week.

“The bottom line: death toll is nothing compared to the flu, but the "fear" could really slow shit down… and give China an "out" on the Phase One purchases if this really gets rolling,” said one market source.

Soybean futures on the Chicago Mercantile Exchange – the most sensitive US contract to changes in Chinese meat consumption – are down 4% since mid-January, when news of the outbreak started to filter out to western media.

Soymeal futures on the Dalian exchange have fallen almost 6% since the start of the year and are at their lowest level since May 2019.

The first confirmed case of the virus was reported in China on December 1.