China, its floods and weakening economy, could affect world grain markets.
Torrential rains and flooding have killed 2,000 people and flooded millions of acres of farmland in China.
Hong Kong traders said the unwanted water could cut China’s grain production by five to 20 percent, but no one is sure.
The United States Department of Agriculture last week dropped its estimate of China’s wheat production by 10 million tonnes from the 1997-98 level, but did not increase its estimate of Chinese imports.
Shaun Wildman of Pool Commodity Trading Service in Regina noted that Oil World magazine, an influential publication covering oilseed production around the world, said China might import more vegetable oil this year.
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But Errol Anderson, of ProMarket Wire in Calgary, warned against expecting China’s floods will lead to large increases in imports.
“It’s just like the Mississippi flood. It floods alongside the river,” he said. A bigger wild card comes from the currency markets, he said.
China last week urged the United States to help the weak Japanese yen.
Although it says it won’t, economic analysts are concerned that if China devalues the yuan to keep in line with the falling yen, it could spark another round of currency devaluations across Asia.
Anderson said this indicates the U.S. dollar is becoming too expensive. The already cooling American economy and stock market will be hurt if exports take a pounding due to the over-priced buck.
Eventually, money traders will decide the U.S. dollar is overpriced and will start to sell and this will also help the Canadian dollar to rise, Anderson said.
One impact could be better commodity prices as U.S. grains exports pick up because they will be more affordable. But the benefit in Canada might be offset by a rising Canadian dollar.
