February 28, 2020 / 7:53 AM / a month ago

UPDATE 2-China's agriculture futures fall as coronavirus hits demand

(Updates with soyoil, palm olein prices and comment)

SHANGHAI, Feb 28 (Reuters) - Agriculture futures on China’s commodity exchanges fell on Friday, with some contracts hitting multi-week lows, as weak demand due to the rapidly spreading coronavirus weighed on prices.

Egg futures on the Dalian Commodity Exchange fell as much as 4.7% to 3,277 yuan per tonne, its lowest level in two weeks, before paring some losses to trade around 4.5% lower.

Egg futures have been affected by spot prices that were hit by a gradual recovery in traffic flow leading to a significant increase in supply, said Yuan Song, research director at consultancy China-America Commodity Data Analytics.

“The workforce is gradually returning, so demand is recovering but it has not recovered to normal levels,” Yuan said, estimating that demand for eggs might not fully recover throughout the first half of the year.

On the Zhengzhou Commodity Exchange, the cotton contract tumbled 3.6% to a three-week low and the apple contract plunged as much as 6%.

Apple prices have slumped since the start of the year as a record harvest from 2019 contributed to high inventory levels, said Kong Lingqi, agriculture analyst at Haitong Futures.

Supplies were abundant even during the fruit’s peak consumption periods at the year-end, but demand has been poor throughout the Spring Festival, Kong said.

China had implemented travel bans and quarantine measures in an effort to curb the spread of the virus, disrupting supply chains and businesses and factories returning to work after an extended Lunar New Year break.

“Goods in the producing areas and in the sales areas are not being sold. Simply put, apple sales are progressing slowly, exacerbating the already high inventory pressure. Sales prospects in the later period will be poor ... Overall prices will move downward,” Kong said.

Soyoil and palm olein futures prices on the Dalian exchange also tumbled in afternoon trade, down 3.9% and 5% respectively.

“School starts are postponed, restaurants remain closed, food consumption (in China) is greatly reduced which led to the decline in domestic demand for oils and fats,” added Kong, as edible oils like soyoil and palm oil are mostly used for cooking purposes.

The Shanghai Commodity Exchange’s benchmark rubber futures also fell on Friday as fears over the coronavirus, which has now spread to Europe and the Middle East, deepened.

Reporting by Emily Chow Editing by Amy Caren Daniel and Maju Samuel

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