Trying to stop the spread of Covid-19 is having serious ramifications. Most non-essential businesses are shut down, and economies around the world are receding as individuals hunker down. It has had a huge affect on markets as well.
In the week ending March 21, 3.2 million Americans filed for unemployment. That is 4 times the previous record. Some think their unemployment rate could top 30 percent in the second quarter of the year. The biggest concern is how long this might last.
Another fallout from the pandemic is the affect on government deficits, as they attempt to inject liquidity into the system. The US passed a $2 trillion fiscal stimulus bill, while Canada has pledged $82 billion. Both promised more, if necessary.
Government deficits have accelerated since the 2008 recession, and will explode with all the new spending. The Parliamentary Budget Office suggested the Canadian deficit could hit $112 billion in 2020. Our accumulated debt sits at $713 billion, so that would be an increase of over 15 percent!
The affect on agriculture has been more muted compared to many other industries such as energy, tourism, airlines and manufacturing. I suppose that’s because everyone still needs to eat to survive. However, overall, Covid-19 is likely more of a negative influence than a positive one.
The USDA issued their prospective planting and March 1 stocks reports today. Corn stocks were 172 mln bu less than expected. However corn acres to be planted this spring were put at 1.355 mln more than traders thought, which would easily offset the smaller stocks.
Soybean and wheat stocks were guessed accurately. Wheat acres were 327,000 below expectations while soybeans were 1.355 mln less. However, the survey was done in late Feb and early March and much has changed since then.
The biggest change was the sudden and drastic lack of profitability in producing ethanol. This is obviously tied to the collapse in energy prices. Many plants are shutting down, and corn futures and basis are under pressure.
In South America, it has become dry in many key areas. This would affect their double crop corn more than their soybeans. Brazil’s currency, the real, fell another 4 percent this week to its lowest level ever. This makes them more competitive internationally.
There has been much deserved praise for those on the front lines dealing with current situation. This includes health care workers, truckers etc. Farmers too are key people in the struggle to get the world back to normal.
As I mentioned earlier, everyone still needs to eat every day.
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