Greek financial incompetence, a weaker euro and the strong Canadian dollar add up to worse prospects for durum and malting barley sales to Europe, analysts say.
The currency issues also allow Scandinavian oats to flow into the U.S. southeast, while there’s a large crop sitting on the Canadian Prairies looking for buyers.
“With a declining euro, that really affects competitiveness … from North America,” said Canadian Wheat Board malting barley market expert Arvin Pirness at the GrainWorld conference in February.
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The euro depreciating against the Canadian dollar makes Canadian durum seem more expensive to European buyers and makes European durum seem cheaper to North American buyers.
The same applies to European malting barley, which seems cheaper to buyers like those in China.
“With the uncertainty in the Eurozone, there are a couple of crops that are really starting to impact,” Pirness said.
The euro’s problems have come as Greece stumbles through a fiscal crisis, with its spending far above levels it had claimed to European monetary officials.
The euro, which Greece uses, relies on strict spending limits by the countries that use it to keep it credible.
Greece’s inability to stick to those limits and evidence it disguised its overspending have caused some to question the euro’s stability.
Greece has been desperately trying to avoid the sovereign form of bankruptcy, which occurs when the world’s bond buyers refuse to buy new issues.
That has raised worries about Portugal, Italy, Ireland, Greece and Spain, collectively dubbed the PIIGS. They use the euro and have been spending beyond acceptable limits, except Ireland, which has aggressively reduced its spending.
With the euro in its first real crisis, Canada’s strong financial position and seeming competence in banking have attracted investment in the loonie, driving it higher.
That makes Canadian crops appear more costly.
Europe already has growing stocks of malting barley and durum, adding to the problem. The oat stockpile is leaving Europe to challenge Canadian exports.
“The U.S. may be the only real outlet for (Scandinavian) oats,” said Strychar.
About 85,000 tonnes of Scandinavian oats have gone to the U.S. to date. Most in the trade believe about 100,000 tonnes will be shipped to the U.S. from Europe by the end of the crop year.
