With greater control over the evolution of the Coronavirus (COVID-19) in China, a return to the country's activities is already being observed, with prospects of normality for the flow of trade in the medium term, after the successive public measures taken to contain it. population and merchandise transit.
“Everything indicates that China is on track to resume its economic activities with greater strength throughout the next quarter”, pointed out INTL FCStone, in a special report released this Monday (23). Attention is still focused on the recovery of Chinese port logistics, with the government adopting cost-cutting policies and tariffs for cargo at ports in order to facilitate trade.
Although the outlook points to a Chinese recovery, the spread of the virus in the rest of the world indicates a major global slowdown, with several countries closing borders and adopting confinement measures for their populations.
“These measures, despite having proven effective in slowing down contamination, have a major impact on the population's employment and income and, consequently, on the economy as a whole”, considers INTL FCStone.
According to the group, even though agricultural commodities have greater resistance in a scenario of change in demand, since they are food, the possible impacts need to be monitored, both in the international market and internally.
Brazilian market
In Brazil, demand for national sugar was not significantly impacted. “COVID-19 does not appear to have affected sugar shipments in recent weeks – especially from the port of Santos, the main shipping hub for the commodity”, explains INTL FCStone Market Intelligence Analyst, Matheus Costa.
The functioning of ports is a favorable condition for the demand for Brazilian products. For example, the cotton market, whose Brazilian exports remain surprisingly strong, with great Asian demand. “The market expected a strong reduction in Brazilian shipments, which has not yet been observed. In January, the South American country exported 308.8 thousand tons of cotton, an absolute record for monthly shipments”, highlights the group, in a report. In February, plume shipments reached 169.9 thousand tons, registering an increase of 81.7% compared to the same period of the previous year and a record for the month.
For coffee prices, the slowdown in demand may be minimally balanced by the feeling of tight supply in the coming months. However, if the problem persists, the prospect of large production for the 2020/21 harvest could put a lot of pressure on prices, while the arrival of new coffee on the market approaches (in mid-June). It is noteworthy that Italy, the third largest buyer of Brazilian coffee, was the first to present severe problems due to the coronavirus.
The evolution of the virus also challenges and changes the dynamics of the meat trade, with the forecast pointing to an increase in household stocks, while wholesalers and restaurants will further reduce their sales scales. “The drop in the purchasing power of the final consumer, amid a possible economic recession, encourages alternative sources to beef, such as pork and chicken, which are cheaper”, explains INTL FCStone.
Meat production still stimulates domestic consumption of corn for feed, but the more restricted supply in the domestic market is a concern due to the summer harvest being below 26 million tons in a year with smaller carryover stocks. “The off-season is closely monitored, since the lack of rain can harm production potential”, assesses Market Intelligence Analyst, Ana Luiza Lodi.
Regarding the use of corn for ethanol, one of the factors that reinforced the growth in domestic demand for the cereal in recent years, there may be impacts due to the drop in oil/gasoline prices, which have weighed on biofuel prices, reducing or negative margins of the plants.
Despite the COVID-19 epidemic having started in China, the world's largest soybean importer, the outlook for Brazilian exports remains positive, with ship line-ups for March indicating volumes that could exceed 13/14 million tons. In the domestic market, for now, there are still no signs that the crushing can be stopped, even though margins are favorable. Furthermore, the activity of processing soybeans into meal and oil is carried out by few employees.
Source: Agricultural News
