Analysts Cite Recession, ASF, Trade War As Potential Black Swans

“If one morning you wake up and 5 a.m. there’s a tweet that it’s a done deal with China and they take 20 million metric tons of corn that we weren’t expecting, and Mexico takes a bunch of corn additionally, then what? I think that’s a possibility, but nobody’s thinking that way and you can’t count on it.” ( Farm Journal )

2019 has been the year of the unknowns. Nobody anticipated the weather that started the growing season, nobody expected the trade war with China to last this long and nobody could have imagined a crop that was barely planted before the fourth of July. Unfortunately, there’s potential for more unknowns to impact the future. Chip Nellinger of Blue Reef AgriMarketing and Bob Utterback of Utterback Marketing say global recession, African Swine Fever (ASF) and a quickly resolved trade war could be black swans in 2019. 

“If [ASF] hits the U.S. you’re gonna loose $25 per cwt in five days, $80 hogs will become $45 hogs just like that,” Utterback told U.S. Farm Report host Tyne Morgan. “Then you lose the feed use. That’s a pretty good negative.”

While Utterback hopes that won’t happen he says the borders are loose enough that it’s probably a matter of time. 

“We don’t have enough inspectors, and there’s such loose borders,” he said. “I’d be surprised if we don’t get it.” 

The analysts agree that a global recession could prove to be a black swan this year. In fact, Utterback said he thinks it’s the biggest black swan. 

“The biggest one is the federal deficit getting out of control and leading into a world recession,” he said. 

Additionally, demand continues to be a black swan. While Utterback is considering the possibility that seed genetics outperform what the market thinks is possible and supplies soar, Nellinger has a different theory.  

“We’re just kind of disregarding the possibility for a Chinese trade agreement, and Trump continues to hint that a Mexican agreement is yet to come,” he said. “If one morning you wake up and 5 a.m. there’s a tweet that it’s a done deal with China and they take 20 million metric tons of corn that we weren’t expecting, and Mexico takes a bunch of corn additionally, then what?  I think that’s a possibility, but nobody’s thinking that way and you can’t count on it.” 

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