Geopolitical concerns regarding the rising tensions between the United States and North Korea have been taking their toll on the global beef market lately, says Dr. Glynn Tonsor, Kansas State University agricultural economist. He told Radio Oklahoma Ag Network Farm Director Ron Hays that this was especially obvious at the end of last week, when outside market influences and fundamentals combined added stress to not only the board, but the actual movement of product as well.
“There’s something called a ‘Fear Index’ which is actually monitoring what people pay for options - the right to protect themselves from big moves in that spike,” Tonsor said. “That occurs when global concerns about geopolitical issues escalate. And, we definitely had that this past week.”
Beginning this week, though, it seems financial markets in both Asia and the US have regained some of their confidence, and a resulting rally ensued. But a situation like that, is not always the case, Tonsor says. And, there is still another wildcard out there lurking that could drag markets down again - that being China’s reaction to how the US handles the increasing threats from North Korea. Tonsor says North Korea may not be a major player in our export portfolio, but the indirect impact it could have, could be costly for the US if it were able to disrupt trade with customers in the Pacific Rim through diplomatic pressure.
“Time will tell what the formal relationship with them is and probably most importantly, what China’s role in that is,” Tonsor said, also alluding to the domestic issue of sheer product volume being placed in the pipeline. “There’s definitely growing concern about how lots of animals were placed in the last Cattle on Feed report. We will watch what this upcoming August one will look like. But exactly how we’re able to move those cattle, I think is continuing to weigh on these markets.
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