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October 5, 2001
WTC/Pentagon disasters:
Ag impacts are minimal
By Lana Robinson
Field Editor
Commodity markets weakened in the wake of the World Trade Center and Pentagon disasters Sept. 11, but when trading of ag futures resumed, action was surprisingly calm and in fairly good order. But what impacts can U.S. farmers expect in the months and years ahead, in the face of recession and an all-out effort to end terrorism? Several economists offered predictions in recent days.
"The long-term picture will undoubtedly turn brighter as history records market reaction to other disasters," said Jose G. Pena, Uvalde Extension economist. "While stocks have fallen sharply shortly after previous other disasters, six months later, stock indexes were often higher than before the disaster. The American economy is very resilient and will regain its posture."
A bearish USDA Crop Production and Supply and Demand Report with respect to major crops, issued three days after the terrorist attack, could explain some of the market response, Pena noted. He said prices are not out of line with supply and demand conditions and seasonal price trends.
Beyond military action, which may be brief and targeted in the war on terrorism, Terry Francl, a senior economist for the American Farm Bureau Federation, suggested that ongoing covert activities could alter political partnerships and trading patterns for food and fiber. Areas most likely to be affected are parts of Asia, the Middle East and Northern Africa.
"The potential impact from the war on terrorism to agricultural exports appears fairly minimal at this point. There may be some concerns that expanded terrorism activities could cause some transportation dislocations. However, in the past, terrorist activities have been more focused on the disruption of people's lives than physical destruction with the notable exception of the attack on the New York Trade Towers," Francl noted.
Sharp drops in cattle prices following the attack are likely due to the ailing economy, but he said the halt of travel and tourism may have also reduced demand for beef.
Ernie Davis, Extension livestock marketing economist in College Station, said the drop in cattle prices was already anticipated.
"We've got 5 percent more cattle on feed now than a year ago. We were already predicting prices were going to get lower on fed cattle, and that's happened. I would think that most of that would have happened even if we hadn't had this scare," he said.
Davis does not see a recession hurting domestic beef sales.
"What it could affect is fast food chains. People are still going to be busy, and that could increase demand for more home preparation foods and convenience foods—heat and serve beef products," he suggested.
Davis also theorized that a tightening of capital—or even the psychological effects of a recession—might curtail herd expansion, which would help prices to hold.
AFBF's Francl said both domestic and foreign supplies of food and fiber appear to be secure and predicted more of the same, price-wise, for now and the foreseeable future.
"There are some areas where we should strive to make ourselves less vulnerable and energy supplies would be one," he added.
