Financial woes in southeast Asia could hit home for prairie farmers in the next few months.
In recent months the bottom has fallen out of currencies in countries such as Indonesia, Thailand, Malaysia and the Philippines.
That means it will cost those countries more to buy foreign products, including Canadian grains, oilseeds and special crops.
“There may be a bit of a slowdown in business in the October to January period as this works its way out,” said Canadian Wheat Board information officer Deanna Allen.
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Asian consumers may shy away from bread products if the price of imported cereal grains rises, opting for such cheaper domestic food as rice.
And flour millers and feed companies that buy grain from the U.S., Canada and Australia could face financial ruin if the situation lasts for a while, say analysts.
“Many of the smaller southeast Asian feed companies are on the brink of bankruptcy,” said one unnamed U.S. commodity trader quoted by Reuter News Agency. “The other big ones are not buying until the very last minute.”
Indonesia is the biggest wheat importer in the region, usually buying around two million tonnes a year. That number is expected to be cut sharply in the wake of the currency crisis, which has seen the Indonesian rupiah lose 32 percent of its value against the U.S. dollar from July 1 to Oct. 23.
During the same period, the Thai baht has lost 32 percent of its value, the Malaysian ringgit 25 percent and the Philippine peso 19 percent.
Last year Canada sold nearly 1.5 million tonnes of wheat to Indonesia, 284,000 tonnes to the Philippines, 245,000 tonnes to Malaysia and 155,000 tonnes to Thailand.
Allen said that while the board is concerned, one positive factor is that most of the millers with which the board does business seem to be on solid financial footing.
And she said all grain exporting countries will be equally affected, since all grain traded in the region is priced in U.S. dollars.
Francois Catellier, executive director of the Canadian Special Crops Association, said the industry has been working hard to develop markets in the region, with some signs of success, such as selling feed peas to the Philippines.
“That could be affected in the short term, if people have a harder time paying because of currency devaluation,” he said.
For years, virtually every grain and oilseeds market outlook conference has focused on the so-called Asian Tigers, the rapidly growing economies of southeast Asia that would be the source of much future growth in world demand.
While the events of the last few weeks and months have come as a surprise, exporters say they still believe the growing population and underlying economic strength of those regions will allow it to bounce back.
“I’m still a big believer in that marketplace,” said Catellier. “Longer term, we still see it as a major market.”
“I’m still a big believer in that marketplace. Longer term, we still see it as a major market.”
