With China closed off, grain prices have slipped and the future remains uncertain. Grain prices took a major decline last part of February 2020. Closing off China means shutting down the demand and adding to the current market surplus. In January corn hit a high of $3.94 and since then it has been around $3.70 ish. The demand for agricultural goods in China has not declined, but what has declined is the confidence in actual delivery of goods. The coronavirus has made the future uncertain, putting out there the big question that remains unanswered. Will the transportation process still be able to maneuver smoothly, delivering grain products to the Chinese people, without any hiccups, as it has done for the past 10+ years?
Some Chinese food producing factories are experiencing labor shortages, in certain instances due to a large number of mobile workers returning to their communities to enjoy the New Year’s Celebration, while at home they were quarantined, now they are unable to get back to work. In addition, supply chains are being challenged where food distribution channels have been severely hampered, due to the quarantines.
In addition, a ban preventing Chinese farmers from delivering chicken and egg products to market, has caused market input of chicken and ducks to decline by 50%. Current worries now, are that future meat availability could plunge, particularly due to another factor, the African swine fever also has contributed to a drop in pork meats available to Chinese consumers. It is also possible that their staple food crops wheat, rice, and vegetables availability may also decline if the coronoviurs continues into their crucial planting season.
Agribusiness now has to rethink how to make deliveries to potential markets for second time, you might recall the first time was due to the trade wars of 2018. They need to act fast to keep the faith of investors and prevent grains prices from dropping any further. A new path for delivery of USA agricultural products to China urgently needs to be mapped out. The Chinese demand remains strong for our agricultural products, maybe even more so, with the quarantines. With no end in sight to the coronovirus, logistic managers have to figure out how to get over this bump in the road. Planting season is just around the corner, and American farmers are depending on a market with decent grain prices to maintain their livelihoods and feed their families.
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