The impact of a germ spreading in China can jar markets on the other side of the world.
Analysts say the world’s markets have become so entwined that threats to supply or demand almost anywhere can have immediate effects on crop and meat prices.
Increased global trade may be generally good for the world, they say, but it also makes any bang echo much louder around the world.
“It’s been a tough last couple of years,” said University of Missouri agricultural economist Ron Plain. He noted that Sept. 11, the Afghanistan war and the latest Gulf War have all shaken markets. So did the anthrax scare, and now the markets are getting scared by Severe Acute Respiratory Syndrome, or SARS.
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David Reimann, a Benson Quinn GMS floor trader at the Winnipeg Commodity Exchange, said jitters go through the market any time the public in any major country gets worried about something.
“When there’s big uncertainty and we don’t know what the outcome is likely to be, most traders will tend to reduce their positions and keep close to home,” said Reimann.
“An air of concern drops over the market until people get a clearer picture.”
SARS, which was reported as probably infecting 267 people in Toronto and 4,500 in China, has been identified as a price depressing factor in the soybean complex, which is the basis for canola prices.
Analysts have been worried that fear and disruption in affected countries will cause economic slowdowns, which will hurt demand.
Traders of the soybean complex were worried because big disease problems in China could cut expected Chinese soybean imports. Those imports are something soybean markets have been counting on.
So far, China has not cut its imports and soybean prices last week actually increased because of expectations of tight year end U.S. stocks.
In North America SARS appears to be contained mainly to the Toronto area where officials say it is declining, but if it spread to other cities, Plain said meat prices could be affected.
“We tend to shift our diet when there’s an outbreak of human disease,” said Plain, a pork and beef market analyst.
Whenever a new disease spreads, consumers, whether in Toronto or Beijing, tend to stay at home and avoid public places like restaurants. People will still eat meat, but they tend to eat different cuts at home than at the restaurant. People cooking at home are likely to cook fewer expensive steaks than they would consume if they went to a restaurant for supper.
Manitoba Pork Marketing Co-operative chief executive officer Perry Mohr said he thinks pork prices won’t be directly affected if there is a slump in restaurant trade.
“If people eat out less, it might mean people would eat more pork,” said Mohr. “There aren’t many pork houses. But there are dozens of steak houses.”
If demand for expensive steaks declines, overall beef prices will fall and there will be less demand for livestock feed until demand returns. That would hurt soybean meal prices because its value is linked to feed
demand.
Reimann said buyers and sellers of commodities are very cautious when fear starts spreading in a market. There can be quick jumps or drops in price, but then trade drops and falls into limbo.
“You may see panic liquidations as people get to the sidelines,” said Reimann. “But then people tend to just sit and wait.”
