Canadian farmers haven’t yet seen sales scuttled by the credit crisis, but marketers are keeping a keen watch for trouble.
And while there are no reports of cancelled or lost sales, there are disquieting rumours.
“We’re hearing about problems (in the international grain trade) with customers getting letters of credit,” said Bruce Burnett, head of market analysis at the Canadian Wheat Board.
Peter Hall, chief economist at Export Development Canada, has heard similar rumblings.
“Our sense is that credit is getting tighter to get,” said Hall, whose government agency helps Canadian exporters find and develop export markets.
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“Even good risks are having a difficult time lining up what it is they need for the next little while.”
The wheels of world trade are greased with easy credit that has been readily available for many years, but the credit crisis is removing that grease, and some wheels are beginning to squeal.
“There was a lot of liquidity sloshing around in the last few years,” Hall said.
“We’ve had an unprecedented expansion – about 16 years – with one blip in the middle, and that is an unusually long expansion. When you have a long period of expansion, you usually have a frenetic period of growth.
“We saw that from 2004 to 2007. What we’re seeing right now is an unwinding of the excesses that built up. It’s never an easy process to go through.”
So far, there appear to be no reports of Canadian agricultural sales being lost, but future sales may take longer to complete, Burnett said.
“It hasn’t affected the demand, but even the best customers out there are having to look at their credit lines and make alternative arrangements.”
While world export trade is likely to suffer because of the end of easy credit, agricultural trade is expected by many to fare better. Both crops and meat are needed for human survival, and while people around the world may soon have less money to spend, they still need to eat.
Ted Haney, president of the Canada Beef Export Federation, said Canadian exporters and overseas buyers have not cancelled or delayed sales.
“We are not seeing the credit crisis at this time interfering with either consumer spending for basic foods, including meat, nor are we seeing it affecting Canadian companies’ ability to generate credit to fund exports or international clients procuring credit in order to continue purchasing,” Haney said.
International meat sales tend to be on a cash or nearly-cash basis already, Haney said, so exporters and overseas importers are not as reliant on borrowed money to run their sales and purchasing.
He said he wouldn’t expect to see meat sales collapse if the world financial problems continue, but consumers may switch to cheaper cuts.
“There could be a switch from tenderloins, ribeyes and striploins to sirloins, round steaks and chuck steaks,” Haney said.
Burnett said the grain trade tends to survive downturns better than other goods because people aren’t as willing to go without them.
“At the end of the day, people do have to eat,” he said.
“It’s a staple, not a discretionary. It’s not an area that’s going to see huge cutbacks.”
