Crop futures resilient in economic turmoil

World stock markets have plunged and commodity markets have slumped with them.

But crop markets have been more resilient than most and some analysts think they will hold up, even in the face of worldwide worry.

“We hear that some foreign buyers will use this dip to get some coverage up,” said analyst Rich Nelson of Allendale, Inc. as equity markets plunged Monday.

“Fundamentals remain strong for corn, neutral for soybeans but maybe a little ugly for wheat.”

The metastasizing European debt crisis, the economic slowdown in China and the debt-downgrading issue in the United States sent markets into a tailspin. The Aug. 5 announcement by Standard and Poors that it was downgrading U.S. government debt caused anxiety to cascade through markets.

But while the S&P 500 fell 7.2 percent and the TSX composite fell six percent last week, nearby corn futures rose four percent, holding up through a week of market anxiety and only submitting to the downward pressure on Aug. 8.

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Canola futures over a week fell about $15 per tonne, to $543 per tonne in midday Monday trading, but that represents only about a three percent decline. And prairie canola basis levels are still strong.

In recent weeks there have been many rumours of overseas demand slipping for crops, but some analysts say there has been little to back them up.

“I’ve read those comments, but the weekly export statistics aren’t bearing it out,” said Mike Krueger of The Money Farm in Fargo, North Dakota. In fact, corn and soybean exports are still within expectations and wheat exports are doing better than expected, Krueger said.

Don Roberts of electronic newsletter CanolaInsight said overseas canola demand has been weaker than expected, but prairie-based crusher demand has been large, so domestic buyers are chasing producers.

Nelson said rumours of weak demand keep popping up, but so far don’t seem to have much substance.

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“You hear this stuff, but it rarely comes up in the actual numbers,” said Nelson.

Krueger said the worsening economic problems in the world might be behind the rumours of softening demand for crops.

With so many problems in so many places, people are assuming demand has to wane for even such staple commodities as crops.

“I think most of it is anticipating a slow-up, but I don’t think we’ve seen it yet,” said Krueger.

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