Nissan to lay off thousands of workers as sales drop    Trump picks Susan Wiles as White House chief of staff    Three charged in connection with Liam Payne's death    Israel passes law to deport relatives of attackers, including citizens    Monkey mayhem in South Carolina after 43 primates escape research facility    Russian anti-war teenager faces five years in jail after failed appeal    Uproar in Ghana after president unveils his own statue    BD and INS partner to elevate standards of infusion care in MENAT    Qassim emir launches 52 health projects costing a total of SR456 million    Dubai Design Week launches its 10th edition, celebrating creativity and innovation    Fakeeh Care Group reports 9M-2024 net profit of SR195.3 million, up 49% y-o-y driven by solid revenue growth and robust profitability    GASTAT: Passengers of public transport bus and train soar 176% and 33% respectively in 2023    HRT does not impact life expectancy — UK health body    Liam Payne's body to be flown back to the UK    Arab leaders and heads of state congratulate US President-elect Donald Trump    Neymar suffers muscle tear, out for 4-6 weeks    Suspect arrested for banking fraud totaling SR493 million as Nazaha pursues corruption charges    Al Nassr secures 5-1 victory over Al Ain to edge closer to knockout stage    Al Ahli extends perfect start with 5-1 victory over Al Shorta    Mitrovic's hat-trick leads Al Hilal to 3-0 victory over Esteghlal    India puts blockbuster Pakistani film on hold    The Vikings and the Islamic world    Filipino pilgrim's incredible evolution from an enemy of Islam to its staunch advocate    Muted Eid celebrations for millions of Nigerian Muslims    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Agricultural markets: Hoarding and delivery logistics in focus
Published in The Saudi Gazette on 28 - 03 - 2020

The corona virus negative impact on global demand has received most of the attention lately. During the past week however we have also started to see the impact on supply, or potentially the lack of supply, being felt as well. It has given several commodities a boost, not least across the agriculture sector
What is our trading focus?
CBOT Wheat - WHEATMAY20; Arabica Coffee - COFFEENYMAY20; Cotton - COTTONMAY2; OJK0 – Orange Juice
The global economic downturn that is currently unfolding have led to demand destruction for key commodities on a major scale. The energy sector led by gasoline has borne the brunt of the collapse in global energy demand as businesses shut down, workers stay at home and airlines ground their fleet. With this in mind the covid-19 outbreak has so far been a story of falling prices amid the drop in demand.
During the past couple of weeks however we have started to see the impact on supply, or potentially the lack of supply, being felt as well. It has given several commodities a boost, not least across the agriculture sector where the price of wheat, coffee and orange juice are now all trading up on the month. Commodities are goods that need to be physically transported from producer to the consumer. When the supply chain or logistics break down the impact is being felt through higher prices and this is what we have started to see recently.
A prolonged supply disruption now risks feeding through to higher prices in general. This at a time where the market already has done a 180 on inflation expectations after the US Federal Reserve on Monday rolled out some of its heaviest artillery to announce ‘open ended' QE. It was a reminder of the moves they made in March 2009 which finally succeeded in stabilizing the global markets. The actions back then helped add some fuel to a 85% rally in the Bloomberg Agriculture Sub index from 2009 to 2011.
As the number of countries and cities under lock down continues to grow this is a development that requires close attention. It raises the potential for commodity prices being supported despite the oncoming recession. In other sectors we are seeing these developments supporting metals from copper to gold and platinum/palladium.
Arabica coffee and CBOT wheat have received most of the attention with both trading up strongly during the past couple of weeks. Coffee due to logistical problems in South America with Bloomberg reporting that: "Brazil's Sao Paulo state will begin a 15-day quarantine from Tuesday, while Colombia has put its entire population on a three-week lockdown to stem the spread of the virus. El Salvador President Nayib Bukele also ordered the closure of all non-essential businesses through April 3."
Wheat because global stay at home consumers have been hoarding flour-based products from bread to pasta and cookies. Just like the pandemonium seen in the gold market this week due to logistics it is important to stress that the world has not suddenly run out of supplies but we are facing a period where goods may struggle to reach their destinations. Other countries like China has been adding to its strategic reserves while some producers have restricted their exports in order to preserve domestic stocks.
Orange juice has been another overlooked commodity, which has suddenly sprung back into life. Stay at home US consumers have been stocking up on frozen orange juice and the rally this past week has been the most aggressive since 2015. Normally price spikes like these are mostly associated with periods of frost scares in Florida.
Not all agriculture commodities are winners with cotton being a prime example. The fiber is most often spun into yarn or thread and used to make a soft, breathable textile. With thousands of brick-and-mortar stores closed around the world, the demand for clothing has collapsed and retail outlets are seeing an unprecedented build in inventory.
Apart from trading the individual commodities there a several exchange traded funds that provide a broader exposure to the agriculture sector. Measured in market cap the DBA:arcx is the most popular followed by AIGA:xlon. They track different indices and have different compositions, both in terms of which futures contracts and how many they track.
— the writer is Head of Commodity Strategy, Saxo Bank


Clic here to read the story from its source.