February is a paradox. Leap year or not, it’s the shortest month of the year yet it always feels like the longest month of winter.
Then March appears with its light, colour, and hope.
That’s what is needed this March as political leaders, markets, and the world economy tumble into a virus-choked mudhole. Worse, this mess will likely get messier.
How much messier? Unknowingly messier.
For example, the coronavirus essentially shut down China for 45 days before the nation somehow claimed that the number of newly diagnosed citizens began to fall.
What we do know, however, is that 45 days is 12 per cent of one year so China, as a nation, may have lost up to 12 per cent of its economic activity already this year.
What will the world economy look like if key nations such as Italy, already locked down, and America, where schools, universities, and convention centres are beginning to lock down, take a similar time to return to normal?
It’s truly a guess and guess high, not low.
Now add to that sour picture the Saudi Arabian/Russian fight over the global crude oil market. In just two weeks, the virus-fuelled duel to cut production to push up prices devolved into a produce-or-die match between two oligarchies hoping to drown each other.
Almost every nation expected the brawl to bring higher crude prices. On March 8, however, the race to the bottom between the two began and crude prices collapsed from US$60 per barrel the week before to US$30 per barrel that night. And, just like that, the world’s leading commodity lost half its value.
Cheap crude sounds great until it hits the economy’s kneecaps.
To get a closer-to-home idea of the devastating impact of crude’s price collapse, consider what would happen to the rural economy if cash soybeans fell from US$9 per bushel to US$4.50.
Now consider both price collapses happening in less than two weeks.
While that hasn’t happened, both — and, really, all commodity — markets are under the triple threat of still-in-place American tariffs, coronavirus-slammed world demand, and now a bloodletting oil war whose shock waves will pound the U.S. ethanol market and global oilseed markets.
For proof, reported Yahoo Business, just moments after the Saudi/Russia oil war exploded onto world markets March 9, American biofuel players dove for cover. “U.S. ethanol margins got crushed,” that day.
Share prices of ethanol makers, it continued, were hit first and hard with some falling by nearly a third.
Worse, according to biofuel officials on March 11, the “White House now appears ready” to appeal a “unanimous court decision that would halt the Environmental Protection Agency’s abuse of Small Refinery Exemptions… which have destroyed demand for billions of gallons of homegrown biofuels.”
But the president’s always-weak promise to protect the U.S. ethanol market is a campfire compared to the implosion of the global crude market. If crude prices remain at half their March 1 value, either ethanol prices — and corn prices, too — must fall to remain competitive or ethanol plants must close because they can’t cover their variable costs.
Either way, court battles over refinery exemptions will be one of ethanol’s — and agriculture’s — smaller problems this year if today’s coronavirus woes continue to snowball.
If so, March, the traditional month of hope and spring, will be little different than grey February.
The Farm & Food File is published weekly in newspapers throughout the U.S. and Canada.