Several developments influenced crop prices this week: the falling loonie, weather problems in Brazil, U.S. biofuel policy and prospects for increased exports from Argentina. But in the end, the prices of major crops closed the week little changed.
The Canadian dollar fell below US72 cents following the U.S. Federal Reserve’s decision to increase its interest rate by 25 basis points. The Fed said it would continue to raise rates, perhaps to 1.375 percent by the end of 2016.
Crude oil also fell on rising stocks, and that too weighed down the loonie. Analysts now believe the Canadian dollar might remain below 75 cents all through 2016.
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A weak loonie supports Canadian agricultural exports and Canadian crop prices but can push up machinery and input costs.
However, in the United States, the market is concerned that the stronger U.S. buck will further slow American crop exports.
As traders digested that news, the weather forecast for central Brazil turned drier and took precedence in the market, pushing soybeans higher.
Mato Grosso, which is expected to produce 30 percent of the country’s soybean crop, is already dry and the forecast indicates little relief in the forecast to the end of 2015.
A state agricultural organization lowered its production forecast by one million tonnes to 28.3 million. Meanwhile, it is too wet in some southern growing regions.
Conab, the national crop forecaster was not concerned and nudged up its country-wide production forecast by .46 million tonnes to 102.4 million.
However, the forecast might shrink in coming months if it remains dry in northern growing regions.
That would support soybean futures, but the rally in soybean oil futures seems to have run out of steam partly because the focus in the related palm oil market has again shifted to the large current stocks and away from the idea that future production might dip because of dry weather earlier this year.
Another development in South America was the new Argentine government eliminating export taxes on corn and wheat and trimming the tax on soybeans. The government also removed controls on its currency, which caused the peso to plunge by more than 25 percent.
Argentine farmers will now receive many more pesos for every tonne they sell.
This is expected to unleash over the next few months an estimated eight to 10 million tonnes of soybeans and six to 10 million tonnes of corn that farmers had been holding back in hope of a change in government.
