Six degrees of separation is the theory that anyone on the planet can be connected to any other person in the world through a chain of acquaintances that has no more than five intermediaries. The theory was first proposed in 1929 by a Hungarian writer, and it was proven more recently in an Internet experiment conducted by a professor at Columbia University.
This latest research and the advent of the computer age have opened up new areas of inquiry related to six degrees of separation in such diverse areas as power grid analysis, disease transmission, corporate communication, computer circuitry and economics.
The theory certainly can be proven in agricultural economics, where the most obscure factors can be connected to or can affect commodity market prices.
Almost every farmer who has faced the vagaries of the market has at one time asked the question, “What doesn’t affect commodity prices?” And the answer is a resounding, “Not much.”
There are the most obvious and expected factors, many of which affect a crop’s supply, such as the weather. A drought in one part of the country can be expected to boost the commodity prices received by farmers in another part of the country where rain has been plentiful. And a weather-related disaster in one country can mean a windfall in another due to improved crop prices.
No farmer, of course, wishes misfortune upon another, whether he or she be in another part of the country or another part of the world. But still, everyone watches the weather for its possible economic ramifications. And weather conditions in places such as Brazil and Argentina become as important as the rain or sunshine in your own backyard.
But then, there are the less obvious factors that are connected to or cause fluctuations in market prices, many affecting the demand for a particular crop. Something as isolated as a person becoming ill from eating peanuts on an airliner can cause ripples in the peanut market. The incident becomes news which then becomes a full-blown issue of peanut allergies, with alarmists calling for peanuts to be pulled not only from airplanes but also from school lunchrooms. It’s a domino effect that can be brutal on demand and the corresponding prices received by growers.
A more recent example is the impact of such a cause-and-effect on the price of soybeans. Having weathered a year filled with reports of Asian soybean rust, soybean producers certainly didn’t need yet another reason to worry, but they have it in the form of a deadly bird flu.
Bird flu outbreaks to date have been restricted to Asia and Europe, and U.S. officials appear confident that sufficient safeguards are in place to prevent the virus from entering our food supply. But that hasn’t stopped the issue from affecting soybean prices.
Soybean futures fell sharply in late November primarily over media reports of a possible bird flu pandemic, including news of a low-pathogenic avian influenza being discovered in Canada. These reports affect poultry production most directly, which, by extension, can affect feed demand, especially in Asia and Europe.
China, the world’s largest buyer of soybeans and the second-biggest consumer of corn, reported seven new cases of bird flu during the last week of November, and two people have died there. The United Nations estimates that 140 million birds have been destroyed in Asia since the outbreaks began in 2004.
The economic effects of any avian influenza outbreak can be significant. Expenses to conduct depopulation and quarantines, as well as the direct loss of production, affect farms and regions where the flu is occurring. However, even larger economic effects come from factors such as international trade bans due to concerns over the flu entering a country’s food supply.
And if all this isn’t enough, soybean producers also can ponder how the second-largest U.S. crop on record and the potential for excellent crops in Brazil and Argentina will affect the supply side of the ledger.
In the world of commodity prices, it literally is always something.