Markets Struck Down by Virus

Source: By Chris Clayton , DTN Ag Policy Editor • Posted: Friday, March 13, 2020

Coronavirus Shocks Commodity and Stock Markets, Disrupts Daily Lives

According to the latest count, 126,000 people have been infected by COVID-19 worldwide, 68,000 have recovered and 4,600 have died, the Associated Press reported on Thursday. (Photos by DTN and courtesy of the CDC)
According to the latest count, 126,000 people have been infected by COVID-19 worldwide, 68,000 have recovered and 4,600 have died, the Associated Press reported on Thursday. (Photos by DTN and courtesy of the CDC)

OMAHA (DTN) — The metaphoric “black swan” known as the coronavirus has swooped in and quickly put a hold on daily American life and routines and continued pummeling both commodity and stock markets on Thursday.

Soybeans hit a new nine-month low in the May contract with a 13 1/4 cent drop to land at $8.59. November soybeans were down 13 3/4 cents as well. May corn closed down 8 3/4 cents on Thursday, also hitting its contract low at $3.65. December corn was down 5 1/4 cents as well.

“Meal and oats were the only things with tiny gains on the day, but everything else was just a bloodbath of red across the entire commodity board Thursday,” said DTN Lead Analyst Todd Hultman. He added that the downturn does not appear as severe long term as the 2008 market crash, but the downward market moves have been swift. “It’s the uncertainty of when can we resume life again on any normal — or quasi-normal — scale.”

There may be no great strategy when such a rapid price collapse happens, but it highlights the value of risk management. A few weeks ago, Hultman pointed out the value of buying soybean puts.

“A lot of people poo-poo buying options or that sort of thing, but here is a perfect example of a risk that could not be anticipated ahead of time,” Hultman said. “In retrospect, it looks pretty good to buy a put option for 3 or 4 cents a bushel, which is almost nothing compared to the risk we are seeing right now.”

DTN Livestock Analyst ShayLe Stewart noted the mixed signals in livestock, given live cattle contracts were down the $3 limit while cash hogs were up slightly, 5 cents at an average of $54.04. Stewart said the commodity markets are following the stock market down, but people still need food.

“I think that’s a lot of the fear of it, but that’s completely against all of the facts of it,” Stewart said. “Even as we’re evaluating this, people are still eating and still consuming.”

U.S. oil prices also dropped 4.5% to end at $31.50 a barrel. April ethanol was down 4.1 cents a gallon Thursday to $1.181. That is down from $1.241 last Friday’s close, and Thursday’s close is the lowest close for spot ethanol since 2005.

The tumble in stocks has come fast and furiously. On Feb. 12, the Dow Jones Industrial Average was sitting at 29,551 points, looking like it was ready to crest 30,000 for the first time ever. Stock trading was temporarily halted for the second time in a week, but the downslide continued when trading resumed. At closing Thursday, the Dow hit 21,200 points and had fallen 10%, the largest one-day decline since 1987. The Dow has lost 28% of its value in three weeks. The S&P 500 is down 27% since its peak on Feb. 19.

Trying to stem the losses, the Federal Reserve on Thursday stepped in again, deciding to add $1.5 trillion into funds banks lend to each other through Friday. The Fed also announced it will buy $60 billion in Treasury bonds over the next month.

AG EVENTS CANCELED

If you were set to attend a major conference over the next month, you might want to check with the organizers to see it’s still happening.

For agricultural event planners, the phrase of the moment has become “out of an abundance of caution and concern.” Like much of the country now, the coronavirus is forcing several high-profile agricultural events to be canceled or postponed.

The annual Ag Day events planned for March 24 in Washington, D.C., were shut down as all government buildings are closing to visitors, including USDA. Agri-Pulse also will postpone its accompanying policy conference that had been set for a day earlier. California officials canceled that state’s Ag Day 2020 event that was set for March 18 in Sacramento.

Congress also announced it is now shutting down the U.S. Capitol, House and Senate office buildings, and the Congressional Visitors Center will be closed to the public until April 1.

In Texas, the Houston Livestock Show and Rodeo was closed Wednesday after Houston officials declared an emergency. The rodeo was set to run until March 22.

The American Farm Bureau Federation announced it would cancel this year’s Young Farmers and Ranchers Conference that was set to start Friday in Louisville, Kentucky, “out of an abundance of caution and in the interest and health and well-being of our members, staff, and their families and communities.”

The National Cattlemen’s Beef Association and Public Lands Council canceled its spring legislative conferences in Washington that were set for the end of the month. The American Coalition for Ethanol canceled its federal fly-in that had been set for April 2-3 in Washington, D.C.

“Based on the number of Hill offices that have declined meeting requests due to the coronavirus and our overall concern for the health and well-being of ACE members, we have decided to cancel,” said Brian Jennings, CEO of ACE. Jennings added, “Medical experts testifying this week on Capitol Hill warned Americans COVID-19 will continue spreading, so we need to prioritize the health and safety of our members.”

The Commodity Futures Trading Commission was also planning its open meeting on agricultural issues at the Federal Reserve in Kansas City, Missouri, on March 31, the first time the CFTC had scheduled the event outside of Washington, D.C. The meeting will now happen back at the CFTC’s offices in Washington. The CFTC and Kansas State University will also postpone the Agricultural Commodity Futures Conference that was set for April 1-2 in Overland Park, Kansas, a suburb of Kansas City.

Alltech also announced its ONE: Alltech Ideas Conference, set for May 17-19 in Louisville, Kentucky, will now be a “virtual” event that people will watch livestreamed. The Alltech event typically draws roughly 3,500 people to Louisville.

CONGRESSIONAL ACTION

Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker Nancy Pelosi, D-Calif., each announced Thursday that their respective chambers would remain in session next week as the Trump administration seeks to reach a deal that would provide economic relief for those affected by the COVID-19 virus.

The House was set to vote late Thursday on legislation that includes paid sick leave, a boost in food-aid measures and employment insurance. Pelosi, according to reports, also agreed to changes proposed by Treasury Secretary Steven Mnuchin. President Trump also is championing a payroll tax cut as a stimulus measure.

Senate Agriculture Appropriations Subcommittee Chairman John Hoeven, R-N.D., told DTN on Thursday that neither the Republicans nor the Trump administration would support the current House bill.

The bill contains nutrition provisions, but Agriculture Secretary Sonny Perdue, who testified before the Senate Agriculture Appropriations Subcommittee on Thursday, told reporters that he has not read it.

DTN Political Correspondent Jerry Hagstrom contributed to this report.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/ES)

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