AGRICULTURAL commodities, including wheat, face continuing volatility on global markets, due to uncertainty over the affects of COVID-19, according to Rabobank's latest monthly Agri Commodities Market Research report.
Potential threats, including labour shortages at critical production times due to movement restrictions, supply chain disruption from port or border lockdowns, export restrictions or tax hikes by governments and stockpiling by consumers and speculators will continue to "trigger price reactions", the report indicated.
These additional market influences are above and beyond the usual fundamental concerns about rainfall, financing and crop quality and volume, it pointed out.
"Commodities markets have swung widely amidst concerns for demand destruction and supply chain stability" and that is expected to continue at least in the short term, said the report titled 'Havoc in the Hamper, Hell in the Handbasket'.
"For products such as sugarcane, soy oil, palm oil and corn, the energy price declines from COVID-19 and the internecine OPEC price war, are expected to cause substantial demand destruction (for) biodiesel and ethanol," it said.
"For vital food and feed products such as wheat, coffee and soymeal, stockpiling and supply chain concerns are driving backwardation (where the spot or cash price of a commodity is higher than the forward price)," it said.
"Volatility will remain high in the near-term from potential port/border closures that carry the potential to interrupt and shift global trade."
While wheat as a food staple showed more price resilience compared to most other agricultural or hard commodities, it was not immune to the COVID-19's impacts on trade, the report pointed out.
"Outside asset classes, (northern hemisphere) spring weather and plantings, export demand, supply chain logistics, export restrictions/tax hike and fund positioning will drive the wheat markets' volatility," Rabobank said.
"Supply chains and political actions will be key price drivers in coming weeks.
"Port disruptions so far have been prevented, but they can become an issue, given the concentration of world exports in a handful of key countries."
The report noted that Russia and the Ukraine had discussed a ban on exports or increasing export duties to retain staple stockpiles for their own populations.
"But given the fluid situation, any disruptions of exports can have a bullish price impact - be those logistical challenges, which in these times are rising, worker availability or government-imposed restrictions," Rabobank said.
The report indicated while a warmer than usual winter allowed early sowing, the Black Sea region was dry and needed rain, with a one to three million tonne year-on-year wheat shortfall predicted for the Ukraine, a 5mt recovery for the Russian wheat crop and a 2-3mt recovery in Kazakhstan.
European Union wheat average was down and United States production will be similar to last year, Rabobank said.
Ahead of plantings in Australia, good rains indicated a return to a more normal season's production this year, the report said.
The National Australia Bank (NAB) rural commodities index and report released this week also predicted volatility on international markets, but strong domestic opportunity.
The NAB rural commodities index, with WA at the forefront, surged 8.5pc to post its best month on record in February.
"There's no doubt COVID-19 is wreaking havoc around the world, but at this point we haven't seen any real disruptions to Australian food supply beyond panic-buying in supermarkets," said NAB agribusiness economist Phin Ziebell.
"Domestically, panic buying will bring forward demand for most agricultural products, with the exception of some speciality products destined for restaurants which will likely be in surplus.
"Despite a very challenging 2019 season, there is still grain in storage, the livestock sector continues to produce high quality meat and fruit and vegetables are readily available."
Key risks for agriculture were labour requirements for sectors such as horticulture and livestock processing which may become an issue and inputs like chemical and fertiliser which are largely imported and therefore susceptible to any break down in trade flows, Mr Ziebell said.