The year 2020 did a big favour for market prognosticators.
The pandemic was such a shock that every analyst had a valid excuse for why their end-of-2019 predictions about the coming year didn’t pan out.
COVID-19’s enormous impact gave everybody cover for being wrong, unlike most years when they’re wrong because they got it wrong all by themselves.
A year ago, the general market prognostication was that strong United States economic growth would continue in 2020, with a minority expecting a small recession. (I was one of the recession-expecters.) Interest rates would remain low as inflation remained restrained.
The biggest factors affecting the global situation were expected to be the China-U.S. trade war, Brexit and the U.S. federal election.
Then we were flailed by a hurricane of woe, as COVID-19 arose in China, hit that country’s economy, was allowed to escape to the rest of the planet, and caused the single sharpest economic collapse in history. Country after country went into lockdown, beginning with China but spreading to the European Union, Canada and other advanced nations.
Some disturbing dynamics evolved: China’s often brutal authoritarianism proved itself to be also brutally effective at controlling the homegrown pandemic. Advanced economies, like that of the EU and Canada, proved unable to snuff out the virus despite many strenuous measures. The U.S. appeared to be a senile and demented superpower, unable to put the national interest first. That that allowed the pandemic to spread out of control and cripple U.S. global prestige and credibility.
But there were wonderful surprises too, especially for farmers and agriculture.
The advanced world’s food systems did not fail, despite widespread anxiety that led to hoarding, product shortages and the destruction of pigs, milk and other farm products hit by processor shutdowns.
In fact, the food system proved itself remarkably resilient. (See my previous column on the most overused word of 2020: “resiliency.”) Food kept flowing to grocery stores and out to consumers.
International trade in agriculture fared far better than feared. There was no problem for farmers after the initial shock in supplying the world with crops and meat, as well as processed food products.
Prices were firm, allowing farmers to seed a crop, manage it and harvest it without having to worry about the pandemic. Since the pandemic, the market rally in crop prices has underlined just how insulated agricultural commodities can be from conditions affecting almost everything else in the world. For most western Canadian farmers, this has actually been a good year.
There has been much talk about the pandemic not really creating new trends, but mostly just accelerating existing trends. Those include: the rise of China; the decoupling of the economies of free societies from overreliance upon China; the spread of protectionism and the splitting of the world into spheres of influence rather than operating as a unified whole.
The year also saw a positive development in the growing desire of nations like Canada that still believe in “rules-based” trade to work together to counter the forces of protectionism. Many may have abandoned hopes that China can be convinced to separate trade from politics, and also be mourning the loss of the U.S. as a champion of free trade, but the rules-based supporters are getting organized to at least preserve some of the old order among themselves.
What will 2021 bring? I’m going to guess that the pandemic will end and the world’s economy will grow, but grow more weakly than the bullish expect because much economic pain has been deferred but not eliminated by radical government action.
I think the year will see the continuation of an overall commodities market rally. That will help crop and meat prices, but those will also continue to be based upon the unique supply and demand fundamentals of ag commodities. Farmers have every reason to be bullish about 2021.
If we in the world of agriculture have learned anything from the first year of the pandemic, it’s this: when the world needs food and it’s scarce, it’ll pay whatever is required to get it, regardless of conditions and complexities that are crippling other sectors.
At other times, when the world isn’t worried about food security, or there is too much product for the processing and transportation systems to handle, farmers will face terrible prices and difficulty moving their products.
In other words, for all the shock, drama and unprecedentedness of 2020, for most farmers and agriculture it was a pretty normal year.