Fear of price falls due to coronavirus outbreak

The outbreak of the corona virus in China raises concerns about falling prices for agricultural products, among other things. Are oil and copper prices, which are already falling slightly, the first signs on the wall?

While the extent and impact of the coronavirus is still unclear, commodity traders and investors are bracing. The SARS crisis of 2003 is still vivid in the minds of many investors. The global commodities market collapsed at the time. That has everything to do with the timing of the outbreak, just before the Chinese New Year celebrations that start Friday. This is traditionally a time when hundreds of millions of Chinese travel to their families.

Direct consequences
When the population fears to travel or the government imposes transport restrictions, this has direct consequences for, among other things, the demand for fuel or rubber for tires. The steel industry can also come under pressure if, for example, employees can no longer come to work. If the coronavirus outbreak reaches the scale of SARS, it could cost 260.000 barrels of oil a day worldwide, analysts warn Bloomberg† Oil prices could fall by $3 a barrel.

Another factor is that traditionally there is little trade in the holiday period around the Chinese New Year. It led to volatile stock markets in Asia last Tuesday. European stock markets also ended in the red. On Wednesday there was a little more rest and a slight recovery.

It remains to be seen what impact this will have on the global raw materials market. It is already clear that the copper price, which is often seen as an indicator, is already falling while it has actually risen in recent weeks. If this continues and the coronavirus actually causes less economic activity, this will also have an impact on agriculture. This includes reduced demand for soy, maize, oil, grain and meat.

No air traffic and public transport
According to the latest reports, almost 600 people have been infected with the corona virus and 17 people have died from the effects of infection. The reports were mainly made in and around the Chinese city of Wuhan where the outbreak originated. Air traffic and public transport have now been shut down and residents are asked not to leave the city.

Jeanette Pennings

Jeannet has her roots in the flower bulb sector and she grew up on an agricultural company in the northern part of North Holland. As a generalist she reports for Boerenbusiness across all sectors. She is also exploring the possibilities of sponsored advertising.

j.pennings@boerenbusiness. Nl

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