Coronavirus pandemic crashes commodity prices

By Jessie Higgins
Corn prices were hit particularly hard by the coronavirus pandemic with fewer people driving, reducing the demand for corn-made ethanol. File Photo by Brian Kersey/UPI
Corn prices were hit particularly hard by the coronavirus pandemic with fewer people driving, reducing the demand for corn-made ethanol. File Photo by Brian Kersey/UPI | License Photo

EVANSVILLE, Ind., April 3 (UPI) -- The coronavirus has sent the prices for commodities plummeting, and analysts don't expect them to climb again substantially until the pandemic ends and life begins to return to normal.

"When the coronavirus scare hit, speculators liquidated all the commodities that were at risk," said Arlan Suderman, chief commodities economist at the New York City-based INTL FCStone, which provides market analysis. "It was initially just a collapse of the whole market."


The impact was not felt evenly -- but it was felt everywhere.

Individual agricultural industries are just beginning to work out how their products might fare amid massive, worldwide quarantines.

Corn, for example, has been hit particularly hard. People under quarantine are driving less, and this has dramatically reduced the demand for ethanol, which is made from corn and added to gasoline.

Ethanol plants across the country are suspending activity, Suderman said.


"The rumor is that one-third of the ethanol industry will go offline," said Grant Kimberley, director of market development for the Iowa Soybean Association. "If you have one-third of the ethanol industry not taking corn, that's going to seriously impact corn demand."

Farmers are feeling the impact. Corn futures opened Thursday at $3.33 per bushel, down from a high of $3.85 in early March, according to the Chicago Mercantile Exchange.

"Our local plant for corn is an ethanol plant," said Aimee Bissell, a corn and soy grower in Bedford, Iowa. "They've stopped buying corn. So, even if we wanted to sell grain, we couldn't to our local plant right now."

If the market continues like this, Bissell said, she won't be able to sell all her corn this fall. That presents a big problem because she does not have enough grain bins to store it all.

Bissell has ordered a new bin, but she doesn't know if it will arrive in time for fall harvest. Many of the companies that produce them have slowed or halted production, she said.

"I've looked at all the options," she said. "I'm not sure what we're going to do."

Other commodities, like wheat, are faring a little better. Wheat futures bottomed out at under $5 per bushel March 17 and then began to climb again. They reached a high of about $5.80 per bushel March 25 before beginning to slip back down, according to the Chicago Mercantile Exchange.


That rise started when word spread that some countries were stockpiling wheat in preparation for prolonged quarantines, Suderman said.

Wheat sales are helped because people eating at home tend to eat more vegetables and grains, he said. That may put a higher demand on wheat and rice as people avoid restaurants.

But that also means less demand for meat, Suderman said.

"People's tendency, when eating at home, is to eat less meat and eat more grains and vegetables," he said.

The meat industry is feeling the impact.

Meat prices initially soared at the start of the the coronavirus pandemic, when consumers flooded grocery stores to stock up on essential items like toilet paper, pork, chicken and potatoes, said Russ Whitman, senior vice president at Urner Barry, a commodities market reporting firm in Toms River, N.J.

"There was a surge in demand," Whitman said. "Everybody at once all across the country ran to retail. But the crisis is over. You and I filled up our freezers. Now, we're not going out. We're not stopping at the drive-throughs on the way to work. We're not going to the restaurants."

Meat prices are falling fast, he said.

Lean hog prices, for example, rose by about 8 cents -- from about 66 cents a pound to 74 cents -- between March 16 and 25, according to the Chicago Mercantile Exchange. They's since fallen sharply to about 57 cents a pound.


Beef and chicken prices experienced similar patterns.

All meat prices will likely will stay low until Americans return to restaurants, Whitman said.

"This is unprecedented," Whitman said. "We're taking our best guess."

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