Market analyst: Panic to end, but not pandemic?

Ray Grabanski
Special to the Farm Forum

03/24/20 — There are signs that the government response to the coronavirus pandemic may be close to ending, but the pandemic itself is not likely to end for some time. The count in the U.S. is at 46,450 people infected today, a number that has doubled every 2-3 days for quite some time. So the spread in the U.S. is not being contained, but instead is quickly spreading. We also know that this number is low for a number of reasons:

1. Probably 50-75% of young people don’t even know they have it, so they never get tested. So we could have three to four times the number infected than official numbers say.

2. It takes about five days to detect the virus, so the actual infected numbers are probably two to four times higher than confirmed cases due to a delay.

3. As the infections spread, there is little reason to continue to report every flu like symptom as the medical profession is overwhelmed already. Actual infections in the U.S. could actually be closer to 200,000, but at this point it might not matter anyway as there is only about six to seven days difference between 46,000 and 200,000.

The point is the virus is unlikely to be stopped in the west like it was in China.

Wheat is now trading higher than before the virus selloff occurred 2/21, up 0.5% in price (+3c) as bread is flying off the shelves in the U.S. along with crackers, eggs, milk, and pasta. Consumers are stocking up on necessities, and providing for that demand (not passing government laws restricting the pricing) is the key to success in a market based economy. While wheat is a necessity and probably one of the best foods God ever made, demand for other products which are not necessities is waning.

Things like trips to Disneyland (which is closed), sports events (closed), restaurants (mostly closed), casinos (closed), airline travel (mostly closed), auto manufacturing (closed), etc. Big durable items are also mostly not being produced — but no one is calling for food production (or toilet paper production) and delivery to be closed! These are necessities and will not be closed, or all of us who like to eat are in big trouble.

Soybean prices are also rising recently, but still are 2.5% below the 2/21 price level. But corn is down 10% since 2/21, hurt by the ethanol/energy price fiasco where energy prices are less than half (46%) of the 2/21 price level. That 54% price drop in crude oil in one month has devastated ethanol plants, and corn prices are struggling — not as a feed or food, but the fuel portion of corn prices (about 1/3 of demand) is killing the corn price.

Politicians are fighting to see who can give more government aid (note that’s our money, not theirs) to the coronavirus fight. It reminds me of one of my father’s sayings: “Beware of the most often repeated lie in human history: ‘I’m with the government, and I’m here to help.’” The virus will not be defeated by governments, it will be defeated by people — me and you. Like everything else that is ever done on earth. It’s called personal responsibility, and we all pretty much already know what we have to do.

President Donald Trump is getting disgusted as the Democrats’ desire to add climate change, election control, and other goodies to the aid bill. In fact, it appears Trump is also getting concerned that the cure (social isolation) is worse than the virus itself as it is killing our economy and the function of our daily life. Talk is that in another 10 days or so new rules will come into play where essentially those less susceptible to the virus will have different rules than those susceptible. They will be able to work and do most all of the things they normally do without restriction. Of course, that means exercising personal responsibility if they contract the virus and are sick.

The coronavirus now has 392,331 infections worldwide (up 48,910), 16,767 died (up 1,977), and 102,972 recovered (+4,076). But the only number accurate in these 3 is probably the number who died, as about 75% of those infected under 40 years old don’t even know it. (In China they caused 86% of the new infections.) So in China where testing was extensive, their numbers are probably right (81,588 infected and about 3,000 dead). But in Italy, where it’s out of control, they say only about 60,000 were infected but already 6,000 have died. That looks like Italy has more like 160,000 infected, not 60,000 based on Chinese death percentages. The numbers of infected and those recovered are probably all low and getting further off as the infection spreads. It is likely unstoppable in Europe and the U.S. now, and it looks like Trump realizes it and will not continue to shut down the economy to try to prevent something that is no longer preventable. Instead, social distancing will likely apply to those over age 60 and with health problems, and the rest of the economy (probably 90%) will return as close to normal as is feasible.

Trump’s first hint of that was his tweet Sunday night (March 22) that “We cannot let the cure be worse than the problem itself. At the end of the 15 day period, we will make a decision as to which way we want to go!” The impression is that if the drastic containment measures aren’t working anyway, the alternative is to let young people return to normal activity (work, play, economic production) and just isolate the vulnerable. Frankly, markets will probably recover if sensibility like this returns to governments, and just lets people (you and me) solve the problem. Because at this point, no matter how much government tries to do, this infection seems to continue to spread — perhaps because of the nature of the virus, not the government, you, or me.