Coronavirus: Good news, bad news, uncertainty and opportunity

Whatís worse? COVID-19 or the nationís reaction to it?


Steve Dittmer, BEEF Magazine†

Mar 19, 2020


Dittmer is executive vice president of the Agribusiness Freedom Foundation


With all the panic, herd behavior, government reaction and whipsawing markets, it might be worth remembering that COVID-19 is not the Black Death. Contracting it is not an automatic death sentence. Never mind that this coronavirus will very likely not kill nearly as many people as the regular flu, car wrecks or past epidemics like the swine flu.


There is no doubt that the Trump Administration and other D.C. agencies are trying to get ahead of this epidemic and lessen the impact on the economy and the health care system.


The Federal Reserve, in another emergency session over the past weekend, lowered its benchmark interest rate by over a full point, on top of a half point drop last week. The Fed funds rate is now close to zero and the Fed is pledging to inject more liquidity into the system by buying $700 billion in Treasury and mortgage-backed securities. The rate to banks for short-term emergency loans has dropped to 0.25% from 1.75%.


The administration is talking about actually mailing out checks to citizens to inject cash into the system. Of course, taxpayers will be footing that bill.


Getting ahead of the curve


These are moves designed to get out ahead of the slowdown and prevent an all-out recession. The problem is, the stock market, in the absence of near certainty which no one can provide, has panicked to an extreme degree.


Somehow, the market has decided that there is something they don't know that the Fed knows, leading investors and traders to think things are much worse than they know. Not only psychology is involved but once computers start unwinding positions and selling things into a market with few buyers, the trend is tough to stop.


Those factors beat up the cattle futures, really distancing those markets from the reality of the meat market. The futures care about prospects, not about the real price of beef in the short term.


This week, boxed beef prices jumped $16 on Monday and $12 on what was supposed to be St. Patrickís Day, before the panic cancelled it. Beef prices indicate that people have not stopped eating.


Meanwhile, packers are buying cattle on Mondays and Tuesdays, indicating that beef is moving. Our local beef and pork counters were mostly stocked, last time we checked, but poultry sections were empty, along with eggs.


Evidently, people have not forgotten how to grill or cook at home, and retail movement is making up for the lack of foodservice in-house dining. Of course, for those who donít cook under even dire circumstances, people are at least allowed to come out to pick up takeout orders, as long as they do it before curfew. Heck, Londoners during the Blitz came out more than Americans are supposed to during this government response.


So how are our industryís export customers doing?


Well, Mexico is starting to realize The Wall is not such a bad idea if it can keep Americans from carrying the virus into their country.† Wonders never cease.


South Korea may well have peaked, with COVID-19 new cases on a downward trend, finally dropping to double digit daily figures. The country has reported over 8,000 cases and 76 deaths, a mortality rate of less than 1%. Their number of cases, so far, peaked on February 29.


Japan has not peaked yet, with the highest number of new cases just recently. The number of cases has topped 1,500, almost half of those cases from the Diamond Princess cruise ship. Interestingly, Tokyo is not the city with the most number of cases. There is still argument regarding Japanís testing approach.


Then thereís China ...


Overblown overreaction? ...