The collapse in the oil price in connection with the Corona crisis received great attention worldwide. But according to Goldman Sachs, the situation is just as precarious with another raw material.
• Corona crisis leads to demand shock oil
• The food market is also out of balance
• The effects of the current crisis are likely to be felt for a long time
As a result of the spread of the corona virus, oil demand has plummeted, which is why the price of crude oil has reached an all-time low. For the first time since the start of futures trading in 1983, the price for a WTI contract even fell into negative territory in April. But even if the price level has recovered somewhat since then, it is still more than 50 percent lower than at the beginning of the year.
“Investors don’t want to hear about oil anymore. They have had to take beating and now have enough, so it takes a lot to get them to get back in,” said CNBC’s Jeff Currie, Goldman’s chief resource analyst Sachs during a video conference with reporters.
Food market out of balance
According to the expert from the US investment bank, there is another raw material for which the future prospects are “as delicate as for oil”: the animal population. The corona virus has devastated the food industry and brought the market out of whack.
In order to slow the spread of the corona virus, strict restrictions have been imposed by many countries, including the closure of restaurants. In the United States, this led to such a sharp drop in demand from the catering industry that the fruit and vegetables of some US farmers spoiled and dairies had to throw away their milk.
On the other hand, the number of infections among meat processing workers increased, which is why some of these factories were closed for security reasons. The US farmers seem to have already reacted to this development, because, as Jeff Currie explained, the herd of pigs and cattle has been “drastically reduced” in recent weeks.
Future worries for oil and animal stocks
As a result of this development, the Goldman analyst reported growing concerns that the industry would continue to be able to meet the demand for chicken, pork and beef. Because oil and animal stocks have something in common, says Jeff Currie: If the supply side is damaged, it will take some time to restart the supply.
Currie summarizes the consequences of the corona crisis as follows: “We had a problem with animal populations when it started … Now we have a very serious problem”. That is why the commodity expert believes that oil and the animal stocks of US farmers in 2021 and beyond will be the two dominant topics on the commodities market.
Editorial office finanzen.ch
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