Commodity markets drop on new Covid variant fears

Concerns over the economic effect of the new Covid-19 Omicron variant have caused a slump in oil markets, with a knock-on drop in fuel and farm commodity prices.

Potential lockdowns and travel disruptions on top of already painful logistics issues in haulage and shipping spooked markets around the world.

While the week-on-week drop of almost 5p/litre in red diesel prices was welcome, the fall in the value of many farm output commodities was more dramatic.

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Quotes for red diesel gathered by Farmers Weekly on Wednesday 1 December averaged 72.85p/litre for a 5,000-litre delivery early next week, within 20 miles of the depot.

This was a fall of almost 5p/litre on the previous week, with prices ranging regionally this week from 64.45p/litre to 70.5p/litre.  

Oil prices had already been falling gently for several weeks, but the announcement of the Omicron variant on Thursday 25 November pushed them down dramatically the following day.

This was exacerbated by vaccine manufacturer Moderna’s chief executive saying that Covid-19 vaccines are unlikely to be as effective against the Omicron variant as they have been against the Delta variant.

OSR prices drop

Oilseed rape values fell by more than £20/t in a day on Tuesday 30 November and by £27.70/t over the week to Wednesday 1 December, despite the tight global supply position.

This put ex-farm values for December collection at an average of £544.30/t against £572/t the previous week.

Vegetable oil markets have also been affected by fears over slower demand and good crop prospects for soya beans, as well as losses in palm oil values.

Knock-on effect on wheat market

ollowing the US wheat and maize markets down, the UK feed wheat futures contract for May 2022 dropped by more than £12/t on the week, to stand at £228.80/t by Wednesday lunchtime.

Ex-farm prices lost £15.65/t on the week to average £217.25/t for December movement, while feed barley fell by just over £6/t to average £204.44/t.

With milling wheat short, it maintained a similar premium over feed values to the previous week, averaging just over £262/t.

Across the regions, values remain in a wide range, with feed wheat at £210-£229/t ex-farm for December, and some regions not quoting prices for that month because of logistics issues.

Logistics warning

Suppliers of bulk farm inputs are warning that because of the difficulty in haulage and other supply chain issues, orders for pre-Christmas deliveries need to be made as soon as possible.

They are also advising farmers to cover feed requirements up to mid-January now, as normal delivery lead times are unlikely to resume any time soon.

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