I hope you visit our website and twitter feeds this week for our coverage of two major seeded acreage reports.
Statistics Canada’s survey results were to come out June 25 and the U.S. Department of Agriculture report is due June 28.
We will also have coverage in the July 4 paper.
In the meantime, I draw your attention to a couple of things that caught my eye recently.
As I write this June 24, the Canadian dollar has fallen below 95 cents US. I wrote about the loonie at the end of May, drawing attention to an analysis by Prairie Crop Charts that noted the currency was at a technical point where a major change was possible.
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The catalyst for the loonie’s drop in recent days was the comment by Ben Bernanke, chair of the U.S. Federal Reserve, that the bank would soon start to scale back its $85 billion a month bond buying stimulus program and would probably end it by summer 2014 if the U.S. economy continued to strengthen.
That flood of money acted to depress the U.S. buck. The U.S. dollar is rising against the loonie and other currencies now that the tap will start to be turned off.
The prospect of the end of cheap money weighed on commodities and added to downward pressure that generally good crop growing weather has already put on corn and soybean prices.
The weaker loonie helps to partly insulate Canadian farm commodities from the declines seen in the U.S. markets, but not completely.
The question is, how far will the loonie fall? A few weeks back, the big Canadian banks expected the level would not fall much below 95 cents US before starting to rise again toward parity in 2014.
However, the Prairie Crop Chart analysis warned of the potential for a drop as low as 85 cents.
The Baltic Dry Index was also on the move last week.
The BDI, which tracks rates for ocean ships carrying dry bulk commodities, hit 1,062 points June 24, the highest this year, driven mostly by demand for ships to carry iron ore.
However, everything is relative. Current values are still exceptionally low compared to recent years. In 2009-10, the BDI was regularly above 3,000 and it made headlines in 2007-08 when, at the peak of the commodity frenzy, it soared past 10,000.
The BDI plunged from those heady levels when the U.S. bank and housing crisis hit and many economies in the developed world fell into recession.
Also, many new ships ordered in the heady days were launched, adding to the capacity surplus.
Cheap shipping the last couple of years has been good for Canadian agricultural exports, making them more competitive with exports from countries such as Australia that are closer to importing countries in Asia.
The current modest run up in the BDI is seen as temporary as Chinese steel mills take advantage of recent low iron ore prices to rebuild stocks. These shipments from Brazil to China have temporarily created shortages on other routes, which drove up shipping rates.
I expect the BDI will soften once this business is complete because China’s economic growth is slow by its historical standards and the rest of the world’s economies are only gradually recovering.
