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Paragon Commentary

Futures File: Coronavirus & Corn

Jan 24, 2020

Coronavirus Infects Markets

A deadly coronavirus continues to spread in China, with a death toll of 25 people and over 800 infected so far, according the Friday’s update from the Chinese National Health Commission.

Chinese officials are trying to contain the disease and have locked down transportation to and from five major cities, freezing tens of millions of people in place. The outbreak is coming just ahead of the Lunar New Year celebration in China, a time when hundred of millions of Chinese travel to visit family, adding to the risk of a widespread epidemic.

Although this virus appears to be less deadly than the 2003 SARS epidemic that killed nearly 1,000 people in Asia, officials note that transportation systems are far more interconnected now, leading to easier spread of the disease.

There have been cases in six other Asian nations, as well two confirmed cases in the United States, which is putting the global economy on edge. The lockdowns in China alone could put a damper on their economy, let alone greater international concerns.

As a result, commodities that are especially sensitive to Chinese demand like copper and crude oil sold off this week. Copper dropped by 15 cents per pound to a six-week low at $2.70, while oil lost over $4 per barrel to trade Friday at $54, a three-month low.

More dramatically, gasoline and diesel fuel futures each dropped 13 cents per gallon, bringing gasoline to a four-month low and diesel prices to a one-year low. The fuels are losing ground on fears of lower travel demand.

 

Corn Market Pops

The corn market is heating up, reaching $3.94 per bushel on Thursday, a three-month high.

Prices are rallying as foreign buyers look to U.S. corn for their import needs, since our crop is inexpensive compared to foreign suppliers like Argentina. More demand for U.S. corn would boost exports and drive domestic prices higher.

Meanwhile, soybean prices have been tumbling on concerns about lower demand from Asia and a record-breaking Brazilian soybean crop, dropping Friday to $9.02 per bushel, a five-week low.

As spring approaches, U.S. farmers will be keeping a close eye on prices as they plan which crops to plant this year.

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