Are we entering a bear market or what? With all this recession talk what dangers loom just around the corner? Should Canadian grain farmers be concerned?
Yes. Yes, They should.
One very important factor that farmers must be aware of is the rate of change in which currency has changed. In a very short time period, the Canadian dollar has dropped from 78 cents down to 73 cents. This is huge and the ramifications will directly affect grain farmers. Not only that, but our competitors are also experiencing weakness in their own currency which adds to the complexity.
Why This Matters
On the export side of things, the destination price must always be competitive.
For example, Egypt will only pay $USD 400/mt for wheat delivered to Egypt. Now if the Australian currency dropped by 10% and Canadian dropped by 5% during the same time that means that Australia wheat is 5% cheaper than Canada on the currency exchange alone. (Assuming everything else is equal)
What this means is that because both the Euro and Australian dollar have decreased more than the Canadian dollar our grain is more expensive relative to our competitors. The only way to solve this is to widen out the Canadian basis so that Canadian wheat is competitive on the world market. This is why currency is so important.
Bulls and Bears
Sentiment: Neutral to slightly Bullish
Bullish: Smaller than expected crop
Bearish: Vegetable oil stocks are rebounding
Sentiment: Neutral to slightly Bearish
Bullish: Feedlots are aggressive buyers. Weak $CAD.
Bearish: Lack of export demand
Sentiment: Slightly Bullish
Bullish: Global production will be smaller than expected
Bearish: Financial trauma and drama causing demand destruction
Notice how the CAD has dropped the least compared to the AUS and EURO
Upgrade your Grain Marketing
Check out the website @ insightag.com to learn more.
Feature Product: Grain Navigator.
I have condensed many of the factors into a quick 10–20-minute snapshot designed to help you navigate this marketing landscape. If you’re like 99% of farmers, you need this publication simply because it is designed to help grain farmers make smart marketing decisions.
Purchase for only $200/yr.