Swine Flu Outbreak Already Affecting Markets

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Tuesday, 28 April 2009 15:42

Urbana, Illinois, April 2009 – The swine flu outbreak, less than a week old in the news, has already had an impact on U.S. crop markets, said a University of Illinois Extension marketing specialist. “In the first trading session following the announcement of incidences of swine flu in Mexico and the United States, corn, soybean, and wheat futures declined sharply,” said Darrel Good. “Market participants reportedly are concerned that the threat of swine flu will reduce pork demand, stimulating further liquidation of hog numbers and resulting in reduced feed demand.” Such negative reaction, Good noted, is typical with episodes that create so much uncertainty. “Russia reportedly announced restriction on pork imports from Mexico and selected origins in the United States,” he said. “Restrictions by other importers would not be surprising. Health experts indicate that swine flu is not transmitted to humans through properly prepared pork. The hope is that the initial knee-jerk reaction will be followed by more thoughtful responses. The extent of reported cases of swine flu will be important in determining the depth of demand worries.” Good said a number of other fundamental factors continue to influence crop prices. For soybeans, the Census Bureau reported that the domestic crush during March totaled 144.7 million bushels, 7.2 percent smaller than the crush of a year earlier. During the first seven months of the 2008-09 marketing year, the domestic crush has totaled 987.1 million bushels, 9.6 percent less than crushed during the same period last year. For the year, the USDA has projected the domestic crush at 1.635 billion bushels, 9.2 percent less than the crush in the previous marketing year. “Soybean exports and export sales remain robust as Chinese buying remains strong in the face of a smaller South American crop, particularly in Argentina,” said Good. “USDA’s weekly export inspection report showed cumulative marketing year exports through April 23 at one billion bushels. “During the first six months of the marketing year, Census Bureau estimates of soybean exports exceeded USDA estimates by 42 million bushels. If that margin persists, exports during the last 18.5 weeks of the marketing year need to total only 170 million bushels to reach the USDA’s projection of 1.21 billion.” As of April 16, he added, unshipped export sales were reported at 148 million bushels. It appears that exports will reach or perhaps exceed the USDA projection. For corn, cumulative export inspections through April 23 totaled 1.08 billion bushels. During the first half of the marketing year, Census Bureau corn export estimates exceeded USDA inspection estimates by 35 million bushels. The more troubling development for corn comes from California where actions that could limit the growth of ethanol consumption in that state are under consideration. SOURCE: University of Illinois Extension (visual courtesy CDC) < Prev   Next >