Farmers’ faces go white when you mention the “F’ word during the growing season.
“Frost” is a word that dares not speak when farmers’ incomes are all out there in the field, growing and needing to mature in time to be combined. But, as a journalist, one often talks about frost and its risk during the summer, because it’s a legitimate concern. And if you don’t believe in hexes, there’s no harm done.
But the “R” word in the equity markets is a different matter, because when it gets mentioned too much and traders begin thinking about it all the time, markets tend to tumble. “Recession” is a word often mentioned in the past few years, as bearish analysts have expected a double-dip forever (that includes me, and so far I have been wrong), but in the past two weeks even mainstreamers have begun saying they see another recession happening soon at even odds with recovery continuing.
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The terror inspired by the Eurozone problems and the U.S. downgrade early last week seemed to lift Friday, Monday and Tuesday, but today we’re back into “Runaway!” mode, with the Dow Jones Industrial Average down four percent this morning and the S and P 500 and NASDAQ showing bigger losses. London’s FTSE is down 4.32 percent. Germany’s DAX is down 5.34 percent. Overnight the Asian markets started the slump and had fallen more than one percent by the time the North American markets opened.
What does that mean for we who live, breathe and die by the actions of crop prices?
Hard Red Spring Wheat futures are presently down 10-13 cents per bushel in Minneapolis; Oats are down four cents in Chicago; Canola’s only down six cents a bushel in Winnipeg, showing both the recent relative strength of oilseeds compared to cereals, and showing the way the Greenback roars ahead of the Loonie when the economic wheels fall off the bus. So far the ags aren’t being routed the way equities are.
A recession will be bad for commodity prices and crop prices, even if there are tight S and Ds for some crops. Demand will slip. A depression would be a disaster.
But perhaps being August, this is just a silly season phenomenon, and the “R” word will evaporate in September, when traders and economists get back to their desks.
Farmers will be hoping the same thing happens to the “F” word . . .
