The key to any rally is market stability, a commodity analyst said
By Diego Flammini
Stock markets are struggling as the coronavirus continues to spread globally.
As of Thursday morning, May 2020 prices for corn, soybeans and wheat were down five, 10 and 16 cents respectively.
“Ag commodities are lower. In fact, almost all commodities are lower,” said Abhinesh Gopal, head of commodity research at Farms.com Risk Management. “A lot of the fear is related to the new virus being unknown and the related uncertainty.”
The lower market figures come after the World Health Organization (WHO) officially declared the outbreak a global pandemic on Wednesday.
That evening, United States President Trump announced a 30-day ban on all travel from Europe to the U.S. with the exception of the United Kingdom, the National Basketball Association suspended its season indefinitely after Rudy Gobert, a player for the Utah Jazz, tested positive for the illness, and school districts across the U.S. announced closures.
The ag industry may not have much of a choice but to wait the virus out, Gopal said.
“Patience is key because panic selling just worsens the situation in these times of low prices,” he said. “A resolution to the pandemic will help the market go back to trading based on their specific fundamentals. As long as the demand remains strong and/or the 2020 cropping season features weather hiccups, grain prices will be supported.”
Farmers agree that the situation is out of their control.
“I think everybody is concerned about what the market is going to do, but at the end of the day it is what it is,” Brian Voss, a cash crop producer from DeKalb County, Ill., told Farms.com. “I think it’s the true fundamentals that are going to bring the markets back.”
A similar virus outbreak drove markets down but ultimately resulted in positive results.
The SARS situation in 2002 and 2003 that lasted for about three months sent the Dow Jones down by over 16 per cent, but by the end of 2003 the Dow was up by around 40 per cent.
The coronavirus could have markets operating in the same fashion, Gopal said.
“The SARS example points out that, when the disease pandemic comes under control and health administration bodies like the WHO or CDC (Centers for Disease Control and Prevention) start easing their concern levels for the disease, the markets, including ag, will start stabilizing.”