Do you know how the Turkish crisis is going to work out?
Me neither.
But while I get to watch the situation in a professional capacity, getting intellectual joy out of it, you get to worry about how it is going to affect the value of hundreds of thousands or a couple of million dollars worth of crop in your bins.
That’s less fun, but more necessary.
The good news is that the most likely impact of this crisis of the Turkish lira, which went into freefall a couple weeks ago, is that the Canadian dollar might slip a couple of pennies against the American dollar in the next few weeks, if the crisis continues or spreads.
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Since most crops are priced off the U.S. dollar, getting a chance to lock in some attractive U.S. dollar rates could pay off nicely before the crisis resolves and the exchange rate returns to today’s levels.
David Derwin, an adviser with P.I. Financial in Winnipeg, thinks the opportunity probably isn’t here yet.
The Canadian dollar appears to be in a 75 to 80 cent range (U.S. cents per loonie) right now, so Aug. 20’s 76 cent value isn’t a screaming deal.
However, “if we do see some U.S. dollar strength, and the Canadian dollar starts to get below 75 cents — 74, 73 — then there could be an opportunity to protect those lower currency prices,” Derwin told me.
The Turkish crisis could affect prairie farmers in more direct ways too. Turkey isn’t a huge market for most Canadian grains, but it is a buyer of pulse crops, especially lentils. If that country’s buyers just can’t afford to buy Canadian lentils because their cash just isn’t worth much today, that would exacerbate the problems with clearing pulse crops from the Canadian Prairies.
And if Turkey’s problems create a “contagion” effect in other parts of Africa and the Middle East, then a number of crops would be affected, including durum.
That contagion hasn’t happened, but if it does, having some delivery contracts in the pocket would also be a welcome part of this winter’s risk management program.
