Ag, energy prices slump as Covid-19 infections, fatalities rise

24 Feb 2020 | Andy Allan

Agriculture futures in the US, Asia and Europe fell across the board in early trade Monday over fears the Covid-19 epidemic would hit global economic growth harder than anticipated, sending investors flocking to the dollar and depressing commodity prices.

With Italy, Iran, South Korea, Japan and China all confirming additional cases of the respiratory disease as well as a rise in fatalities, the dollar continued to firm, hitting a three-year high against a basket of currencies.

On Friday, the World Health Organization's Director General Tedros Adhanom Ghebreyesus said the “window of opportunity (for containing the virus) is narrowing,” triggering a risk-off sentiment that saw Brent crude oil futures slump 4% in early trade to $56/bbl, down 30% since the start of the year.

“The rapid shift in sentiment can be explained by concerns about demand: if more and more countries and continents are affected by the virus, this is likely to have substantial braking effects on economic activity and travel,” German bank Commerzbank said in a report Monday.

That slide in oil pressured vegoil futures in early trade, with palm oil May futures on the Bursa Malaysia down 3% to MYR2,543/mt ($602/mt) – a three week low – and soyoil futures down 2.4% to 30.28 c/lb ($667/mt), nearing a four month low.

In China, the fall in soyoil futures on the Dalian was more muted at 0.8% to CNY5,896/mt ($840/mt).

Over in the US, the most liquid contracts for soybeans, corn and wheat were down 1%, 1.2% and 1.7%, while rapeseed futures in Europe were down 1.3% – with all contracts nearing a 2020 low and close to support levels.

In China, major oilseed futures in the domestic market also slumped across the board over fears of more cases, with traders telling Agricensus the move south was triggered by a rise in infections in East Asia.

Soymeal futures on the Dalian Commodity Exchange, a key indicator of global protein demand, fell 1.6% on the day to CNY2,619/mt ($373.08/mt) – the lowest level in two weeks.

And rapemeal futures on Zhengzhou Commodity Exchange also plunged, with the most active rapemeal contract falling more than 2% on the day to CNY2,243/mt ($319.52/mt).