The direction of crop prices in the coming weeks will largely depend on events outside of the grain supply and demand situation.
And a little further down the road, the market will be watching how American farmers adjust seeding plans in the face of miserable prices.
Jitters about the slowing growth in China, the U.S. and Canada and the plunging price of crude oil are keeping currency exchange rates in flux.
The Canadian dollar is falling along with crude oil and also ideas that the Bank of Canada might lower interest rates as the U.S. Federal Reserve increases rates.
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A massive U.S. corn crop is keeping a lid on Canadian feed barley prices.
Canola futures crept higher last week largely because the loonie sank below US69 cents. The path of least resistance for the loonie is down as investors flee crude oil and Canada’s oil industry contracts.
All this is reviving memories of the 2002 62 cent dollar.
We can only hope the U.S. Fed will show caution after the recent market turmoil and delay increasing its interest rates.
However, the weak loonie is helping to boost Canadian exports and mask the worst of the global crop market malaise.
It might be hard to believe, but March canola futures, which are traded in Canadian dollars, are about 13 percent stronger than at the same point last year. Soybean futures in U.S. dollars are down 10 percent from this time last year.
Canadian cash wheat bids this week are little changed from where they were at the end of September even as the Minneapolis spring wheat contract has fallen about eight percent.
This same currency factor is playing out in every major crop exporting region. Weak currencies in the Black Sea region and South America are keeping crop values, priced in local currency, attractive so there is no pressure to cut production.
The biggest hurt and therefore the biggest pressure to cut production is in the United States, where the American buck is the Olympic power lifter of global currencies.
But it is a rare thing for American growers to actually cut total seeded acres.
Indeed one of the questions flowing from last week’s USDA reports was what crops will take up the acres not seeded to winter wheat.
The agriculture department pegged winter wheat area at 36.6 million acres, down 7.2 percent from last year and the second lowest since 1913.
Potentially, unseeded winter wheat acres could go into corn and soybeans.
Soybeans cost less to seed and so might have the upper hand for cash-strapped American farmers who might also face restrictions on how much their banks are willing to lend to them. On the other hand the new crop soybean-corn price ratio at 2.29 is below the long term average of 2.35, meaning on price alone, corn has the upper hand.
In November U.S. market analysts Informa forecast American farmers would seed 90.1 million acres to corn, up 1.9 percent from last year and 85.3 million acres to soybeans, up 2.52 percent.
The potential for reduced production comes from the idea that our American neighbours might reduce their crop inputs to a maintenance level rather than shooting for optimum production.
If that happens it could limit yield and keep total production restrained even as corn and soybean acreage increases.
USDA plans to publish its first survey on farmers planting intentions on March 31.
darce.mcmillan@producer.com
