John Nalivka: A Few Thoughts – Unprecedented
The $20 trillion U.S. economy was strong as 2020 began. It has been for the past 3 years. With the onset of COVID-19, that situation changed drastically. The often-repeated statement is that the U.S. economy is headed for a depression as the result of COVID-19. I would challenge that statement and rather than saying the current economic situation is the result of COVID-19, I would say the American public and the economy is in a severely, stressed, situation as the result of the decisions surrounding COVID-19. The economy’s performance prior to the outbreak of coronavirus was running on all eight cylinders. We didn’t slip into a recession as the result of a cyclical business downturn. Rather, it was the result of Americans becoming unemployed as the result of business closures and social distancing as the result of coronavirus posing a significant and perhaps unprecedented disruption to the economy. Again, this is not a result of the business cycle.
Unprecedented is the term is used to describe an event that has never happened before. I don’t use that term lightly, but I would say that when entire cities and businesses are shut down, the word unprecedented is a fair description. Subsequently, those events have led to a severe economic downturn and changed people’s behavior which brings me to the topic of markets.
Analyzing markets and projecting prices in the current environment is definitely challenging. However, I will not go so far as to use the term “unprecedented.” I think the term “uncertainty” more aptly describes the market outlook. Consumer behavior has become very disrupted and unpredictable. Hoarding may be a normal response to being told to stay at home, but now the question is what will be the tone of consumer buying behavior once the incidence of coronavirus has peaked and begins to decline? Furthermore, when will that “curve flatten” as the experts say and a decline be firmly in place? Those are the key demand-related questions that will shape the market going forward. And that discussion is only further frustrated with regard to the question of opening restaurants.
Supply is one issue. We do a pretty good job of analyzing and projecting that number. Certainly, record beef, pork, poultry production, individually and in total, this year is likely if not highly probable. I am projecting total meat supplies to reach over 228 lbs. per person and the highest since 2007 when that figure was 221 lbs.
Production may be unprecedented this year setting a new record. But demand is the central factor in regard to prices going forward. From that perspective, it may well be “unprecedented” when the lives of U.S. and global consumers return to “normal.”
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