Agri Commodity Markets Monthly March 2020: Havoc in the Hamper, Hell in the Handbasket
The world is waging war against an invisible enemy and energy giants are battling for market dominance. Many of our clients will be reading this monthly from home quarantine, surrounded by family and stock-piles of rice, pasta and lentils. Agricultural commodities markets have swung wildly amidst concerns for demand destruction and supply chain stability.
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For products like sugarcane, soy oil, palm oil and corn, the energy price declines from covid-19 and the internecine OPEC price war, are expected to cause substantial demand destruction via biodiesel and ethanol. For vital food and feed products like wheat, coffee and soymeal, stock-piling and supply-chain concerns are driving backwardation. Volatility will remain high in the near-term from potential port/border closures that carry the potential to interrupt and shift global trade. In the northern hemisphere, weather risk will become increasingly important as summer crops are planted and winter crops emerge from dormancy.