Commodities set for biggest drop since March as farm goods slump
[NEW YORK] Commodities headed for the biggest loss since March, with agricultural products pacing the declines amid concern that the US-China trade spat could cut demand for farm goods.
The Bloomberg Commodity Index, which tracks returns for 22 components, fell 1 per cent to 89.557 at 1:36 p.m. New York time and is set for the largest retreat since March 7. Raw sugar led the drop, falling as much as 5.3 percent. Wheat and corn were the next biggest losers.
China is a major global buyer of US agriculture and increased obstacles to trade could create major ripples for demand. In comments posted on Twitter on Monday, U.S. President Donald Trump blamed countries including Mexico, Canada and China for treating farmers "unfairly" and said he plans to end "big trade barriers."
The grains market is disappointed about the flare-up in trade tensions between China and U.S. ahead of the next meeting between the two countries, said Michael McDougall, a senior vice president at ED&F Man Capital Markets in New York.
Meanwhile, the end of a truckers strike in Brazil, the world's top exporter of sugar and coffee, helped to end concerns over supply disruptions. Meanwhile in the U.S., growing conditions this spring have been generally favorable. As of last week, corn was off to its best start to the season since 1994.
The drop for commodities is a reversal of recent fortunes. The BCOM index rose in the previous two months, partly bolstered by strong crude prices. A recent slide for oil has added to "disappointment" for investors who were betting an inflationary environment would lift prices for raw materials, McDougall said in a telephone interview.
Crude futures fell as much as 1.8 per cent in New York.
Copper and zinc were the only components of the BCOM to gain at least 1 per cent. Wage negotiations are taking place at Chile's Escondida mine, the world's biggest copper source.
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