Dow Jones Bungee Jump, Greece and Canadian Cash Grain Pricing Opportunities

Jittery MarketsIt is not often I can say that I’m writing on a Thursday night when the Dow Jones has plummeted almost 1000 points in a day, the worst crash since 1987.  Is a little jittery out there?  I think so.  Mix a little bit of Greece into your agricultural economics had the Canadian dollar going down almost a nickel in a week’s time and you’ve got uncertainty multiplied.

It almost makes you wonder why we as farmers are so “stable”.  We have just gone through one of the earliest spring planting windows in many years.  Corn planting is said to be over 70% complete in the United States and I’m sure the figure in Ontario is even higher.  It just goes to show you when legitimate companies are reduced to penny stocks in a matter of minutes on the Dow Jones exchange may be planting corn is so tangible; other people might be interested in investing in it.   I dunno.

Last week I found myself in Sudbury Ontario seven stories below the ground taking a tour of my first nickel mine.  I was there to witness the Ontario Basketball Association provincial championships.  For my American readers Sudbury is a wonderful place but it is deeply embedded in the Canadian Shield, essentially cut out the granite rock, home of the Canadian nickel industry.  However, some people would say it is moonscape, because some of the American astronauts were trained there because it looks a bit like the moon.  As I drove in through the rock and scrub I had to do a double check myself.

On my return trip last Sunday driving over eight hours into southwestern Ontario I only saw one tractor working.  That told me one thing that the corn is planted here and it was too early for an extended soybean-planting period.  It also made me think that early spring weather may not mean more corn acres in Ontario because I didn’t see anybody planting, while in most years everybody would be out there.  So who knows?  Based on what I saw I think the early start to the corn planting season with normal precipitation gives us a very good shot of boosting provincial corn yields in Ontario over 165 bushels per acre.  Ditto for our American friends in the United States.

Of course the big hedge for Canadian producers in this current grain-marketing environment has always been in my mind in our cash market.  I mused last winter that maybe the greatest opportunities for future cash sales may lie in basis opportunities on a falling loonie.  So when the loonie closed at 95.21 US cents today, maybe my prophecy is coming true.  And a nickel drop in about a week is about the best news Canadian farmers have had since Christmas.  I will be watching for cash market opportunities on basis now and in the coming weeks.  If you subscribe to the theory, that a $1.15 US loonie is our future, this is your time.  If you subscribe to the theory that a $.85 US loonie is the future, keep waiting.  Grain pricing opportunities will come.  I believe in 2010 most of the risk is on the cash side.

Of course these currency movements as well as the stock market crash last Thursday and subsequent rebound have much to do with the problems in Greece.  Some of you might scoff and say that Greece has about as big an economy as Michigan, so what does that have to do with economic jitters?  The problem is that Greece is part of a larger European economic union with a common currency.  Greece is bankrupt and Portugal Spain and Ireland are very similar.  So sovereign defaults seem to be in the equation and when it concerns a major currency like the Euro, it’s big news in financial markets.  Investors flocked to safe havens and let of this has been the US dollar.  Our Canadian loonie despite how we feel about it doesn’t have the same cachet as the American greenback when economic uncertainty rears its ugly head.

Of course it is difficult to know what is ahead.  That’s why I caution you and that’s why I say it is always difficult to listen to Canadian analysts who predict the value of Canada’s currency.  There are some who say trading on Friday will be a bloodbath and of course there are some who would say it is a buying opportunity.

For Canadian farmers, the events of last Thursday certainly add to the uncertainty, which is 2010. We all know that grain futures spreads are strong and getting stronger.  We all know we’ve had an early spring, which should lead to tremendous crops.  Seemingly the bears are running wild in a bearish market.  The only problem is crops aren’t made in May.  There is still a long way to go.

It is my hope that our European friends “get it together “.  We had made such strides on getting back our global economic growth.  These hiccups out of Greece, Portugal, Spain and Ireland have the potential to take some of the froth off our beer.  At least in the short term it will drive US dollar up and the Canadian dollar down.  That should bode well for cash marketing opportunities ahead.