Fears over a drop in Chinese demand for key commodities due to the coronavirus outbreak has pushed down prices of soyabeans, vegetable oils, corn and wheat, the South China Morning Post (SCMP) reported on 29 January.

March soyabean futures dropped 4.75 cents to close at US$8.97/bushel as of 27 January, according to Food Business News. March soyabean meal fell 50 cents to close at US$297.80/tonne while March soyabean oil slipped 50 cents to close at 31.52 cents/pound.

As of this morning, there were 7,741 confirmed cases and 170 deaths in China. There have also been confirmed cases in Australia, Cambodia, Canada, France, Finland, Germany, Hong Kong, Japan, Macau, Malaysia, Nepal, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Vietnam, the UAE and USA.

The outbreak was expected to seriously dent China’s economy, as well as curtail Beijing’s ability to meet the purchasing agreements it had agreed with the USA in the ‘phase one’ trade deal it signed on 15 January, the SCMP said.

China had agreed to buy an extra US$32bn of US agricultural products over a two-year period, with 2020 and 2021 imports to reach US$36.5bn and US$43.5bn, respectively, compared with US$24bn in 2017.

“However, with the outbreak driving down commodity prices and placing huge swathes of Chinese territory on lockdown, the longer the crisis lasts, the worse the damage to China’s ability to meet the purchase target,” the SCMP wrote.

“There are expected to be fewer state directives to make the US purchases. There were no major purchases made before the holiday period, with China hoovering up increasing numbers of cheaper Brazilian soyabeans, for example, and with purchases in other sectors yet to get moving.”

The SCMP quoted Nick Marro, global trade lead at The Economist Intelligence Unit in Hong Kong, as saying that “the viral outbreak definitely throws a wrench into those [purchasing] plans, not just in terms of logistics – as major ports and transport links are closed or disrupted – but also in [terms of] policymaker attention.

“China will be mobilising most of its resources to handle the outbreak, which is now the top item on the policy agenda. The trade war with the USA inevitably has to come second,” Marro said.

In addition, futures exchanges had been shut since 23 January and were not set to reopen until 3 February, according to the SCMP.

“Anybody that wants to buy soyabeans will not be able to hedge their crush margins on the futures exchange, and that will be an additional reason why people will just hold off on their buying,” said Andrei Agapi, associate pricing director for agriculture at S&P Global Platts.

China’s State Council extended the country’s Lunar New Year holiday by three days in an attempt to contain the spread of the virus and has locked down Wuhan – the centre of the outbreak – and dozens of other cities in Hubei province, by cancelling all bus, train and plane services. Other parts of China have also implemented travel bans. Countries including the UK, the USA, Japan and some EU countries have evacuated their citizens from Wuhan and airlines such as British Airways, United Airlines, Air Canada and Cathay Pacific have already cancelled some flights to China.