Virus outbreak stunts commodities trading

Published Feb. 8, 2020

Following short-term optimism after trade agreements between the U.S. and President Trump, the coronavirus outbreak periodically stunted trade in a number of commodities including wheat and soybeans. 

            According to Farm Progress, commodity prices are slumping as the coronavirus death toll rises, prompting China to extend its Lunar New Year holiday to contain the infection, whose spread is accelerating around the world. 

            “The traders who keep commodities flowing in and out of the world’s biggest consumer would typically be expecting an uptick in demand after a lull during the Lunar New Year holiday that officially started last week, but the rapid spread of the coronavirus has upended the outlook,” they state.

            “Travel restrictions and a reluctance by China’s people to visit restaurants while the outbreak rages may hurt demand in a nation already ravaged by a hog virus that slashed pig herds and cut consumption of livestock feed,” they continue. “The coronavirus is another blow to crop markets hoping for more Chinese purchases of U.S. farm products in the wake of the trade agreement.”

Coronavirus

            According to the Centers for Disease Control (CDC), an outbreak of a respiratory illness caused by a novel (new) coronavirus, originally identified in the Wuhan Province of China. 

            This outbreak has resulted in thousands of cases in China, in and out of Wuhan. There are a growing number of cases internationally, including in the U.S.

            CDC notes the 2019 Novel Coronavirus (2019-nCoV) has a range of symptoms and those infected range from little to no symptoms to severe illness and death. 

            Symptoms include fever, cough and shortness of breath. 

            CDC believes symptoms may appear in as few as two days or as long as two weeks following exposure to the virus. 

            On Jan. 30, the World Health Organization declared the outbreak a “public health emergency of international concern.” 

            On Jan. 31, Health and Human Services Secretary Alex Azar II declared a public health emergency and U.S. President Trump also signed a Presidential Proclamation on Suspension of Entry as Immigrants and Nonimmigrants of Persons who Pose a Risk of Transmitting 2019 Novel Coronavirus. 

            In a press release by the White House, Director of CDC and Prevention Robert Redfield emphasized the health situation in China is serious but the risk to the American public is low.

            “As of today, there are nearly 9,700 cases in China, with more than 200 deaths,” said Redfield. “Additionally, currently there are another 23 countries that have confirmed, a total of 132 cases.  This also includes 12 individuals who have been confirmed in six countries who did not travel to China.”

Agriculture implications 

            The Baltic Dry Index, which measures shipping rates for bulk dry goods such as grains, has fallen 31 percent. Though Progressive Farmer Analyst Elaine Kub notes there are often sharp drops in the index in late January. 

            Following the Phase-One Trade Deal with China, many soybean traders were expecting highly productive export sales to China, but the pace of business has been questioned as uncertainty surrounds how the Chinese economy will react to the outbreak.

            “Prices for No. 2 soybean futures at the Dalian exchange in China fell 11 percent between Jan. 14 and the end of trade on Jan. 23,” says Kub. “Similarly, soybean futures prices in the United States, down four percent since Jan. 14, and physical soybean prices at the Brazilian port of Paranagua, down five percent, have felt the sudden pessimism.”

            U.S. Secretary of Agriculture Sonny Perdue notes he does not know whether the outbreak will upset China’s pledge to increase purchases of American farm goods as part of the recent trade deal.

            “It obviously is going to have some ramifications economy-wide, which we hope will not inhibit the purchase goal that we have for this year,” Perdue said.

            Prior to the trade deal, futures prices rose for goods like U.S. corn Cv1 and wheat Wv1 on expectations for increased Chinese buying. 

            The U.S. Department of Agriculture has not announced grain sales to China in its daily reporting system since the agreement.

Callie Hanson is the managing editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.