The coronavirus outbreak has led to lockdowns all over the globe and its impacts on economies and commodities markets are yet to be fully estimated.
In Brazil, where the government expects the peak of the pandemic to hit the country sometime between April-May, several sectors are closely monitoring its impacts, especially agriculture and livestock, which represent over 21pc of Brazil’s GDP, according to the country’s Confederation of Agriculture and Livestock (CNA).
China, where the virus was first detected, will have the restocking of its herd delayed as the country’s logistics and animal feed supply chain have been severely disrupted by the outbreak. In this scenario, Brazil’s meat exports to China may grow this year, after the Asian country became the main destination for Brazilian beef, pork and poultry shipments in 2019.
While Brazilian meat producers may benefit from this unprecedented scenario, the disruption to logistics in the largest Asian market may threaten Brazil’s access to pesticide supply. Last year, China supplied nearly 40pc of Brazilian pesticide demand, a dependence that is even more concentrated for herbicides, with China supplying 99pc of Brazil´s Glyphosate and Imazaquim demand. At this point, Brazilian farmers might be losing sleep on concerns that the effects of a prolonged transportation interruption could lead to a more significant supply disruption for agricultural chemicals in Brazil.
With long-haul logistic chains all facing unpredictable scenarios, maritime transportation poses another potential risk to Brazilian crop exports. In this case, even while the global pandemic hasn’t yet affected this season’s forecast for Brazilian soybean exports and Chinese demand remains strong, there could be obstacles to fulfilling the demand via maritime transportation in near term.
The impacts of coronavirus outbreak could also reach prices for animal feed, as the pandemic may lead to a drop in demand for such commodities. If this happens, Brazil’s soymeal prices may be pushed down, making it more attractive than dried distillers grains (DDG) to feed buyers. A co-product of corn-based ethanol, DDG is a low cost, protein and fiber rich feed for cattle, hogs and poultry. Prices for both DDG and soymeal have been climbing, but if the latter were to change course and narrow their premium to DDG, soymeal may be preferred.
Follow the latest developments on the Brazilian agriculture and fertilizer markets with our Argus Brazil Agriculture and Fertilizer service.