Analyst fears far-reaching effects of lira crash

The collapse of the Turkish lira could be the beginning of another global economic meltdown that drives down commodity prices, says a commodity broker.

“The Turkish situation is as serious as the Lehman Brothers of 2008,” said Errol Anderson, analyst with ProMarket Wire.

“Anything that ginormous is going to affect trade.”

The lira has lost one-third of its value against the U.S. dollar in the last month and recently touched a record low.

He said the lira has tentacles in the European Union’s banking system in countries like Spain, France and the United Kingdom and even extends to the United States.

Anderson said Turkey’s central bank is trying to prop up the lira by raising interest rates and he hopes they are successful because it is already affecting commodity prices.

Gold fell below US$1,200 per ounce on Aug. 13 for the first time since January, 2017.

The U.S. dollar continues to strengthen against other world currencies and that could slow growth in the U.S. economy and put more downward pressure on commodity prices.

If central bankers can’t generate some market confidence in the next 10 days or so, Anderson feels a global slowdown is on the horizon.

“I’ve been sending out alerts left, right and centre right now and people are sick of me and I realize that. But it’s real. It’s no joke,” he said.

Another immediate concern for Canadian farmers is that Turkey is now Canada’s largest lentil customer with India largely out of the market and the purchasing power of the lira has been severely compromised.

Marlene Boersch, managing partner with Mercantile Consulting Venture, said fortunately Turkey re-exports the vast majority of imported lentils, so buyers that are hurt by the currency on importing lentils make up for it on the export side.

She also believes there could be a side-benefit to the plummeting lira and rising inflation in Turkey.

“I can see producers there would like to hold onto their crops as a protection against inflation. It happens in South America all the time. In which case they’ll have to take more of ours,” said Boersch.

Anderson worries the slumping global economy could push soybean values below $8 per bushel for the first time in about a decade. If that happens the November 2018 canola futures contract could fall below the resistance level of $480 per tonne.

“The only thing that can stop this is if the trade sabre rattling cools off,” said Anderson.

Farmers don’t like selling into a falling market but canola is still profitable at today’s values, so they might want to generate some cashflow straight off the combine.

Growers can always acquire grain on paper down the road using call options or futures contracts.


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