21 September 2001

Commodity markets still jittery after NY atrocity terrorism

By Robert Harris

FUEL and commodity prices have settled into an uneasy calm after panic hit the markets following last weeks terrorist attack on the US.

But it might only be a brief respite and farmers should secure diesel supplies now, warns John Ringwood of midlands-based suppler ACT. "The immediate reaction last week was for distributors to withdraw prices, as they anticipated swift retaliation by the US in the Middle East. Some companies then started talking silly prices – 30p/litre for red diesel."

Although quotes are still hard to find, red diesel is now available for 20-21p/litre on farm, just 2p/litre above last Monday weeks values.

Guarantees of supply by oil exporting countries helped to prevent rocketing prices, said Mr Ringwood. Brent futures for November climbed to over $30/barrel in the immediate aftermath. But they had dropped below $27 on Wednesday, cheaper than before the attack.

That suggests fears of a global recession were outweighing the effect of potential US reprisals. "Its worth keeping an eye on these prices to see how the market is reacting," said Mr Ringwood.

"But I cant see oil prices going down much more. The market is very nervous. People know something is going to happen in the next few weeks. It only takes someone to sneeze in the Middle East at the moment and oil leaps $5/barrel."

Distributors are quoting three to five days delivery because of panic buying.

Exchange rates have remained relatively unaffected, calming fears of currency-induced volatility on commodity prices. Several central banks, including the European Central Bank, the US Federal Reserve and the Bank of England cut interest rates to support financial markets and the $.

"While we are all waiting to see what happens next, we welcome that assurance and the liquidity offered to give markets a degree of stability," said Grant Phillips, managing director of Barclays agricultural banking.

The £ is now worth $1.46, just 1% more than a fortnight ago.

The grain market is also calm. "Food is food and people need it," said Home Grown Cereals Authority director Alastair Dickie.

The animal feed market is also returning to normal after some compounders, concerned about oil and transport costs, stopped forward sales of feed last week, said UKASTA policy director Paul Rooke.

"However, farmers may find some companies keep offers open only for a day or so in case the situation changes quickly." US soya bean December futures remain in the middle of their recent range, at about $170/t. Some quotes show hi-pro soya gained £7/t on the week to £166/t ex-store, but Nov/Apr prices gained just £2/t.

Fertiliser prices have changed little in the past two weeks, says Neil Taylor of Usborne Fertiliser. Forward UK AN is worth £110-114/t for November; imported supplies £95-100/t. "Oil and currency have both settled, but we are keeping a very cautious eye on the forward markets."