Globally, Germany’s winter wheat sown area for the 2020 harvest has been reduced by 7% on the year to about 2.84 million hectares. Farmers had turned to other crops such as rapeseed and other cash crops.
Amid expectations for ample crop supplies and tepid global demand, the futures grain markets showed a high volatility during the week. The soyabean market was abuzz with China having bought huge numbers of Brazilian beans, raising questions about demand for U.S. supplies.
The United States Department of Agriculture (USDA) said that private exporters sold 198,000 tonnes of U.S. soybeans to China.
The USDA also projected that U.S. farmers would grow a record-large corn crop this year approaching 16 billion bushels, potentially building domestic stockpiles of the feed grain to their highest levels in 33 years.
India announced a massive $13.2 billion stimulus package for the country’s beleaguered farm sector that employs nearly 60 per cent of the country’s population and contributes 15 per cent to its gross domestic product. Measures for the dairy sector, animal husbandry and fisheries were also announced during the week.
Food grain production in India in the 2019-20 crop year is estimated at a record 295.67 million tonnes, which is higher by 10.46 million tonnes than the production of 285.21 million tonnes achieved during 2018-19.
India’s agriculture sector is set to grow by 4.5% over the next three years, on the back of trade reforms and investments in farm produce infrastructure, agriculture minister Narendra Singh Tomar said.
More than 2,000 major agri-markets are now functional in the country. State governments have been requested to relax Mandi Act norms so that farmers can sell their produce without going to mandis. The number of eNam mandis has been increased from 585 to 1,000 during the lockdown.
Steel companies in Europe and the US have been slashing production due to the downturn in car making. Initial April sales figures pointed to dismal showings, especially in India, where Maruti Suzuki India posted zero automobile sales in the domestic market, while Bajaj Auto saw its April sales dive 91% year on year. Vehicle sales dived in most markets, as did steel hot rolled coil (HRC) prices.
US steel capacity utilization had slumped to around 50% in early May from above 80% at the start of March. EU steel production has been cut by 50%. China’s total crude steel output over late March averaged 2.48 million tonnes a day, down by 5.3% compared with the same period last year. India saw its March finished steel production sink to 7.09 million tonnes from 8.29 million tonnes in February this year.
Aluminium market is suffering from excess capacity, as smelters continue to produce almost at the previous scale to preserve jobs, causing an estimated excess of 2 million-4 million tonnes per year of aluminum. Aluminium producers will need to find a way to tackle surplus capacities.
The price of gold continued to climb higher this week as renewed trade tensions between the US and China only added to recession woes and COVID-19 uncertainty. Moving above US$1,740 per ounce, gold has climbed 18.6 percent since the mid-March sell-off and is poised to keep edging higher.
In India too, gold prices climbed up after US Federal Reserve warned of a prolonged recession. Gold traders in India expect gold may trade positive towards Rs 46500 to 46700 levels.
The other precious metals performed positively with the exception of palladium, while the base metals started the session with momentum and quickly fell back as industrial demand continues to be interrupted by the global pandemic.
U.S. petroleum consumption has started to rise as the economy emerges from lockdowns, giving the oil industry hope it has come through the lowest point in the cycle. Similar recoveries in fuel consumption are expected at varying rates across the other major economies as they gradually emerge from lockdown and are likely to push the oil market into supply deficit in the third quarter.
In most cases, the recovery in petroleum demand is expected to be led by gasoline (petrol and diesel), as the manufacturing, construction and freight transportation sectors return to work. But jet fuel use is likely to remain depressed for an extended period, as continued quarantines and pressure to introduce social distancing on flights prevents the sector struggles from resuming meaningful schedules.
Meanwhile the US government has also warned the global maritime, energy and metals industries to be on guard for “illicit shipping” schemes that expose them to sanctions risks, particularly with trades involving Iran, North Korea and Syria. The warning came amid reports of Iran sending gasoline cargoes to Venezuela. Both countries’ oil sectors are under strict US sanctions.