For two days, prairie farmers got lower prices for grain, most world grain trading shut down, the wheat board stopped selling and the engine of interlinked commodity exchanges sputtered to a stop.
But three days after terrorists crashed passenger planes into the World Trade Centre in New York and the Pentagon in Washington, D.C., killing an estimated 5,000 people, commodities markets were running, the wheat board was making sales and farmers were again able to get a reasonable price for their grain.
Traders and analysts say it shows that all the destruction and killing don’t change the underlying reality that supply and demand rules the market.
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“Things are back to normal,” said wheat board spokesperson Rheal Cenerini on Sept. 13. “We’ve resumed all normal trading activities.”
That morning the Winnipeg Commodity Exchange, the Chicago Board of Trade, the Chicago Mercantile Exchange and the exchanges in Kansas City and Minneapolis all reopened after a two-day shutdown.
Winnipeg exchange director of marketing Bruce Love said his market could have opened Sept. 12, but chose to stay closed as a sign of respect for the victims in the U.S.
Farmers who tried to deliver on Sept. 11 and 12 discovered that grain companies had widened their basis levels, usually by about $3 to $4 per tonne.
United Grain Growers spokesperson Blair Rutter said grain companies lost their ability to protect the prices they paid when the commodity markets shut down.
“The markets were closed so we weren’t able to hedge what we were buying,” said Rutter.
It was a reaction PCTS Inc. trader Hugh Benham said was inevitable.
“They’re going to discourage producer deliveries,” said Benham Sept. 12, while commodity markets remained closed.
“They just don’t want grain up the driveway right now.”
Some grain buyers stopped taking delivery until markets reopened.
New York’s world-dominant stock markets remained closed Sept. 13 and 14 and analysts expected a lot of volatility when they reopened Sept. 17, but commodity markets fared better.
The United States Department of Agriculture report released Sept. 14 had a bigger impact on prices than the terrorist attacks, analysts said. A Statistics Canada grain stocks report also affected prices more directly.
Commodity markets aren’t generally as volatile as stock markets during a crisis, since the underlying commodities they trade are often seen as a safe haven for money by nervous investors, said one commodity market analyst who did not want to be identified.
Only huge events like the beginnings of world wars tend to have a statistically significant effect, he said.
There have been reports that some international grain companies have raised prices, anticipating increased short-term demand as buyers get nervous about accessing supplies.
Grain industry players were more concerned about long-term implications of the crisis for Canada’s export markets.
“The horrific incident that happened in the United States could easily lead to further actions somewhere else in the world,” said Agricore president Neil Silver. “If that action was to entail some sorts of boycotts, we could certainly be affected here as grain companies and as farmers.”
One of Canada’s best customers is Iran, which borders Afghanistan, a country that could be attacked by the United States for harbouring the incident’s prime suspects, who are Arabs. Arab countries, such as Algeria and Morocco, are also major buyers. Anything that unsettled the Arab world could hurt Canadian grain sales.
It’s not a good time for any disruption, said Silver. “We have a short crop and farmers need to sell every tonne they can.”
Benham said traders will be carefully watching the situation to see how far it escalates.
“Will it have an impact? Yes,” said Benham. “What that impact will be, nobody knows.”
Analysts say shipping lanes, ports and in-land distribution systems are all vulnerable to attacks.
While the terrorist attacks disrupted grain buying and selling, it also upset people in the grain trade, who do jobs similar to those in and around the World Trade Centre.
“Everyone is in a bit of shock about it,” said Love.
