October 22, 2008: 8:47 a.m.
If you think your RRSPs look bad these days, consider the situation of Argentinians.
There are growing signs that the government of Argentina, which never seems to get far from financial crisis, is about to default on its international loans. It has announced plans to seize control of private sector pension plan assets. Many speculate that it will force those pension plans to purchase Argentine government bonds, something that may be necessary if the country defaults and international bond investors refuse to buy new debt issues.( How would you like to have your retirement savings tied up in the bonds of a bankrupt government?)
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Crop insurance’s ability to help producers has its limitations
Farmers enrolled in crop insurance can do just as well financially when they have a horrible crop or no crop at all, compared to when they have a below average crop
What is this going to do for Argentine farmers – one of the prairie farmer’s biggest competitors in the world crop markets? It’s spring there and they need to get another crop going. Are they going to be able to borrow money? Are they going to be willing to borrow money in this kind of climate? What will they do? Will they cut fertilizer use? Will they avoid expensive crops? Will they cut acreage? Fuel prices are getting a lot cheaper, but crop prices look terrible compared to what they were a few months ago. In this kind of climate do you borrow money or plough your savings into a crop that you might have to sell into a down market in six months time?Â
Another Argentine financial disaster – their last default was only in 2001 – could hit the confidence of its citizens the way the sinking of the warship General Belgrano hit them in 1982 during the Falklands war.
No one likes to say these things out loud, but if farmers cut back on production inputs in competitor countries like Argentina it puts Canadian farmers in a better situation. On the production side, this could help the S and D situation improve. On the other hand, if these kind of financial meltdowns occur in other developed nations, Canadian farmers may find some old, reliable customers can’t afford to buy our wheat, canola, pulses, etc.Â
I’m not envious of the folks at the Canadian Wheat Board who have to make the sales projections that their Pool Return Outlooks are based on. How do you come up with a reasonable forecast in a completely wild world situation?
