Bullish Clues for Bearish Times: Canadian Producers Poised for 2010
In a couple of weeks I’ll be “on the land”. At least that is my hope, having finished up my fall plowing in December. At this time of year in Ontario, it’s a bonus to create a stale seedbed for corn in 2010. However, experience has always told me there may be an opportunity in the spring. The weather of this past week gives me visions of that. Cranking up machinery for another year always represents a paradigm shift on Canadian farms.
If I can get in there within the next few days (a true rarity of an opportunity in Ontario) I’ll be able to smooth over the land creating a perfect stale seedbed for planting in late April. By that time, cold April rains or snow may even out the moisture profile. Hopefully, by that time, our machinations in the grain markets will smooth out our marketing plans. Market action over the last week has taken some of the sting out of the March 10th USDA report. The spectre of a late spring and fickle planting decisions is putting some support under late winter market conditions.
Getting a precise number on those “prospective grain numbers” coming up in the March 31st report will surely direct market action until a time in late June when the “crop is made”. Increasingly my default mindset in the American Corn Belt is for 90 million acres of corn and less and less soybeans everyday. I’ll wait to get the specific numbers in a few weeks, but if 2009 taught us anything, it’s about corn’s agronomic superiority to soybeans. In 2010 I see more corn acres, more yield and a corn crop coming in at about 13.5 billion bushels. Our American friends just loving growing corn and I don’t expect that to change this spring.
Still, almost everybody when it comes to the grain markets is bearish. I’m bearish by default, so even in the best of times, its difficult to be bullish. However, in 2010, I think for Canadian producers there may be creative ways to get through this up coming year. Top production as always will be key and a little help from our Canadian dollar might be the other shoe to drop, which might help us. I know, it’s a long shot, but in these bearish times, I have to reach for something.
At the present time, our lovable loonie is within spitting distance of being at par with the American greenback. Last week at the Western Farm Show in London Ontario, I said there is hardly any compelling argument to make for our loonie to go down. Everything says its going up, our economy is good, commodity prices are hot, interest rates will be going up, and its become the darling of currency traders. Needless to say, I still think it might go the other way, at least momentarily in 2010 to create some pricing opportunities for Canadian grain.
Key to any short term loonie devaluation in 2010 will be the action of the US Federal Reserve. If they raise interest rates first and at a faster pace than the Bank of Canada, money will flow out of the loonie and into the greenback. I think we can all agree that interest rates will be going up (they can’t go down when you are effectively at zero) so when this happens is key. June 2010 is as good a guess for a US Federal Reserve move. That will coincide with the crop moving into summer weather. A Canadian pricing opportunity may beckon.
You might say, yes, but what if the Bank of Canada moves first? I don’t think they will, because Mark Carney, the Bank of Canada governor and Prime Minister Stephen Harper know that an above par loonie is not good for the Eastern Canadian economy. The Bank of Canada has made iterations before about keeping the loonie at bay. I don’t expect them to change now.
Of course the other big factor, which may change the bearish tone in the grain markets is our weather and that big event that comes along on any ordinary Tuesday. 1988 was a long time ago, so long ago that some of my young female editors remind me they weren’t born then. However, for this “fitty something” farmer, that hot, dry, sizzling summer burned its stamp into my memory forever. Markets exploded as that “once in a decade/century” drought took its toll. This year the weather analysts say it’s about spring flooding, delays etc. Drought isn’t even on our radar screen. It’s true, a 1988 drought is a stretch, but it’s always in the back of my mind.
Of course our global economy, minus Europe seems to be making a comeback. That’s a good thing, but ah yes, that’s why the loonie is high. So it’s a long and winding road, affected by many factors conspiring together. Sure, everything looks bearish at the moment, but don’t let complacency set in. One of these days, we’re going to wake up and our world may be very different.