On 9th June 2020, Khor Reports attended a webinar hosted by Oils & Fats International (OFI) on the impact of the coronavirus on global oils and fats trade. There were several interesting points made during the session:
The most severe immediate shock from the Covid-19 outbreak has passed. While outputs of the vegetable oils has been affected, the impact was not as bad as initially expected. Demand has, however, been adversely affected due to the lock-downs enforced globally. There is a concern that the markets may have lost sight of the longer term macro-economic shocks.
While soybean prices have been steadily falling due to the pandemic, the decline has also been attributed to market expectations that US will be competing with Brazil in the soybean trade (Brazil still dominates as China’s primary supplier of soybean imports) as well as the US-China bilateral agreement. Since soybean demand from China has been steady, the Asian giant will be reaping benefits from low international prices.
The market currently appears to be more interested in digesting positive news, with each piece of information being construed as optimistic. As such, the full impact of the damage caused by the coronavirus will only be known after the pandemic is truly well and over. It is expected that economies around the world will operate between 80-90% of their capacities by the third quarter of 2020 between July and September, and will only be optimal around late December.
Click here to watch the recording of the webinar.