ST. JEAN BAPTISTE, Man. — Canadian farmers should continue to be shielded by a relatively weak loonie and friendly domestic stocks of crop, says analyst Bruce Burnett of G3 Canada.
But farmers shouldn’t count on continued strength in world oilseed prices nor a significant de-cline of the world glut of wheat.
“I know prices aren’t great, but they certainly could have been a lot worse,” said Burnett, noting that the weak Canadian dollar relative to the American dollar helped lift crop prices north of the border.
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“We could see continued strength of the U.S. dollar and I think that’s probably what’s going to happen here unless things really go off the rails for the U.S. economy.”
Many farmers at St. Jean Farm Days held in St. Jean Baptiste where Burnett spoke, are familiar with the spread between prices offered in American vs. Canadian denominations, many of them shipping grain across the border to United States elevator points in northern North Dakota.
A strong U.S. dollar can mean Canadian per bushel prices more than a dollar higher than U.S. per bushel values.
This gives Canadian farmers crucial cash to pay for inputs and meet debt payments.
Burnett said he doubted the U.S. dollar would significantly weaken in 2017.
The U.S. economy is one of the strongest in the world and incoming president Donald Trump’s promise to spend on infrastructure, which some worry will be inflationary and therefore weaken the U.S. dollar, will actually be modest in scope and will not reverse the trend of strong greenback.
The Canadian dollar is actually firm relative to other global currencies, Burnett said.
He expects that will continue, because crude oil prices are rising, which should add strength to Canada’s economy.
Returning to a 2003 level of 63 cents compared to the U.S. dollar isn’t likely.
“We’re not going to come close to that,” he said.
The big wild card is Trump’s unpredictability and possible belligerence toward trade.
However, even if the U.S. and China fight over trade, Burnett doubts China can do much to reduce its reliance on U.S. soybeans. Other than the U.S., only Brazil and Argentina make major exports to China, and the country needs the crop.
Shutting the door to U.S. soybeans would short domestic needs.
“I think it’s highly unlikely.”
World stocks of oilseeds and wheat aren’t friendly for higher prices.
Oilseed prices are more likely to weaken than strengthen, and the global pile of wheat isn’t disappearing.
However, Canadian farmers are in a better position than many U.S. farmers because local supplies aren’t that burdensome.
Canola demand is strong for both exports and crushing.
As for wheat, while global supplies are ample, high protein wheat is in short supply, which explains the big spread between U.S. hard red winter wheat and hard red spring wheat.
Some people fear that spring wheat might sell off to bring the spread back in line, but Burnett said he thinks a HRWW rally is more likely.
The spring always brings some shifting between corn and soybean acres in the U.S. but Burnett said the present soybean-corn ratio doesn’t bias planting decisions either way.
Soybeans are now at 2.3 times the value of corn, which is close to the historical norm.
At one point, soybeans were more than three times the value of corn, which would have prompted farmers to seed more acres of the oilseed.
