Despite overwhelming evidence from literally every corner of the world, a farmer friend recently related to me that three — not one, not two, but three — rural acquaintances had assured him that “this whole virus thing is just a big hoax to bring down Trump.”
If so, there’s now 100,000-plus graves, more than a half-million hospital patients, and trillions of dollars of lost equity to prove them wrong. Dead wrong, in fact. The COVID-19 virus is not a hoax. Billions more people have months more of restricted movement and, as that occurs, local, national and international markets will become more restricted, too.
When will these almost frozen markets — hotels, restaurants, airlines, ports, cities and nations — thaw? No one knows, but plan on the worst and pray for the best, and you’ll be prepared for everything in between.
Economy hurting
What’s already baked into this growing calamity is skyrocketing unemployment and plunging U.S. Gross Domestic Product (GDP). If we’re lucky, economists predict the number of unemployed Americans will hit 10 million in a week and 20 million in a month. If we’re unlucky, well, the sky’s the limit on both.
Likewise, the lucky version of GDP suggests a 25% decline in the April-through-June quarter. Unlucky means 40% down.
Farmers
American farmers and ranchers already know what unlucky looks and feels like. The week most “shelter in place” orders were issued by big states like California, Illinois and New York, futures prices on nearby contracts of corn, soybeans, wheat, hogs and cattle got pummeled.
In just days, however, the biggest market driver, panic food buying, receded and markets rebounded to near or above pre-COVID-19 levels. Part of the rise was tied to market speculators who believe China, a key U.S. ag customer slammed by the disease in January and February, was re-entering U.S. grain and meat markets.
Regardless, 2020 farm income prospects remain dismal. Should the U.S. economy take the lesser predicted hit, private forecasters see U.S. corn and soybeans returns clipped $50 to $90 per acre, a staggering $9 billion to $16 billion reduction in gross income for just those two crops.
And, foresee Brent Gloy and David Widmar, whose firm Agricultural Economic Insights issued that forecast March 23, U.S. meat markets could have an even tougher time.
Meat markets
First, meat purchases are highly dependent on consumer income. During 2008’s Great Recession, “…per capita consumption of all meat… turned lower,” they note and, worse, “…beef consumption took nearly 10 years to recover pre-recession levels.”
Moreover, since more than half of every food dollar is spent on meals outside the home, closed restaurants and limited food pick-up sites likely point to weakening livestock and poultry prices.
Crude oil
Ethanol producers aren’t spared either. The oil price war between Saudi Arabia and Russia drove crude oil prices so low in mid-March that you could buy a barrel of crude oil for nearly the same price as two, choice rib-eye steaks.
That’s right, 42 gallons of crude oil — from which refiners can “crack” 16 gallons of gasoline and other products — cost $24 while two lovely, ready-to-grill rib-eyes cost just $22.
Crude’s crash, and Covid-19’s deep bite into nationwide fuel sales, caused the Renewable Fuels Association, ethanol’s powerful lobbying arm, to announce March 23 that its members would soon cut two billion gallons of “annualized output” from its forecasted 15-billion-gallon 2020 production.
That 13% drop in U.S. ethanol production means about 700 million bushels of corn used to make it now returns to the already overwhelmed market as free stocks. Free, indeed.
Ethanol could be ag’s canary. While not a perfect example, it is a sign of how quickly and badly markets sicken if some outliers choose to follow their own “It’s-a-hoax” rules and not the rules of civil society.
And that’s just ethanol; it’s only bushels and jobs. It isn’t lives. Not yet, anyway. And it certainly isn’t a hoax. None of this is.
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I understand the pinch that corn producers may be feeling. Perhaps it is time to stop using a food crop to produce an adulterant for motor fuels and go back to feeding people and livestock with it.
I know that I have been feeling the financial pinch in less miles per gallon of motor fuel burned as well as the damage done to small engines and to marine engines that I own for years now. Ethanol free fuel often isn’t what it’s labeled nor is it commonly available.
None of that is a hoax.I get to help pay for that damage through taxes to pay farming subsidies. Every gallon of ethanol took a gallon of petroleum to produce. That isn’t a hoax either.
Ethanol as a motor fuel is a viable option when a country is oil poor but agriculture rich when burned in machines that were designed to burn it in the first place such as Brazil for example.
From the perspective of this rural American ethanol as motor fuel in the US only makes sense to lobbyists and the mega corn producers who pay them.
Dear Mr. Alan: The Covid19 virus is not a hoax, but what about the draconian response to it?
Torpedo the world’s largest and most productive economy as the “cure” for a disease? This “cure” is much worse than the sickness. Curtail if downright abolish freedoms of religion, assembly, and travel?
Poit the finger at an incompetent FED GOV which sucks up $11,000,000,000.00 each year and is totally unprepared for an epidemic in America? What, pray tell, are its 10,899 employees working on? Let me tell you: they spend their days on solving sexism, trans-genderism, prejudice, Islamophobia and gun violence in major cities. Outrageous! The entire operation ought to be shuttered.
CDC and NIH produce “models,” which are now being analyzed and found to be totally false, if not fraudulent. They relied upon a “model” by one Neal Ferguson of the UK’s Imperial Medical Society, which initially predicted 500,000 deaths in the UK, then “down sized” to 20,000 death (a 25 fold decrease!) and now finally to 5.700 deaths overall in the entire British nation. This “adjustment” was made by plugging in social distancing and staying at home. Falsehoods and fraud is what these people peddle to the uninformed CDC and NIH used this study to “extrapolate” US deaths! More fraud!
Let’s be frank: a usual common flu season kills thousands in America. Why is FED GOV and the media producing panic? Victims of this latest covid19 flu have pre-existing conditions, such as morbid obesity, lung damage caused by smoking, heart and circulation issues, compromised immune systems, and in general, extremely poor lifestyles. I am not being judgmental–just factual. You make choices in life that you must live with.
America has experienced many epidemics–NONE of which have closed down the US economy. Wash your hands, don’t touch your face, keep Grand Ma and Grand Pa at home–and everyone else–back to work or school.