For many of us Dubai seems so far away.  Needless to say twice a week two big Airbus A380 Emirates aircraft take off for Dubai from Toronto.  Your loyal scribe was on one of those planes last January en route to Bangladesh.  So when I saw Dubai making the news today my memory quickly flashed back to my January excursion through one of the newest Middle Eastern financial centers.

For those who do not know financial markets were shaken today when Dubai World, one of the Persian Gulf Emirates main conglomerates with total debt of about US 59 billion had a bit of a hiccup.  The Dubai government asked for permission to postpone pavement of part of that debt sending shivers through financial markets around the world.  Memories of Lehman Brothers were dancing in their brains.  From my perch high atop a big green monster of a combine, the specter of a rocky effect on the grain markets was dancing in my mind.  With the smell of a sovereign meltdown happening on American Thanksgiving, grain markets were shut down.

Of course as of this writing nobody really knows how “Dubai World” will be affecting grain markets or financial markets in the next few days.  Of course the problem is that a default by “Dubai World” might represent a domino with other cards following within emerging markets in sending us down that financial chasm again.  Nobody wants to go there especially farmers finishing up this wet fall.  Memories of our grain market crash around the Lehman Brothers meltdown I was hoping we could put in the history books.  I’m not speculating, I’m only telling you the psychology behind market reaction as of tonight.

Let’s rewind for a moment back to those Emirates A380s which take off from Toronto Pearson Airport twice a week.  I can honestly say when I got on that aircraft for my flight to Dubai it was a bit of a buzz.  I didn’t know much about Dubai other than its glimmering buildings and its Palm development out into the sea.  After a 13 hour flight from Toronto the plane descended and I could see all those beautiful buildings.  This place seemed to be “out of this world”.  Like, how does this place exists in the middle of the desert?  Hopefully we won’t wake up tomorrow or next week and find out that it was all financial fraud. Maybe the road back to global economic prosperity might involve a few loose cards in our emerging markets like Dubai.

As I’m writing this grain prices are down on the overnight markets based on the bearishness caused by the perceived default in Dubai.  I guess the few bucks I left there in January did make much of a difference.  Needless to say this is not the best tonic for our grain markets going into Christmas and the New Year.  Despite all the problems that we’ve had in the production fields this past year, we’ve still got one of the biggest corn crops on record.  That means a record demand that we have been seeing for both corn and soybeans needs to be maintained in order to sustain prices.  Financial stability in outside markets especially in the banking sector is one of those “default considerations “which for the most part is always taken for granted.  That’s why when Lehman Brothers and maybe this Dubai world saying raise their ugly head, agricultural commodity prices sometimes can be sideswiped.

To say this is a surprise is an understatement.  Just turn to the Discovery Channel on your television and you’ll typically see some type of construction project in Dubai being shown.  The Dubai default story is certainly a big story but it also should serve as an example of a completely different outlier coming into the grain markets which can upset the turnip wagon.  I have learned that grain markets don’t like it when financial markets lose some of their bearings.  Lehman Brothers and Dubai World may certainly be in the same category.

The question is how can we translate this bad financial news into something good for Canadian agricultural producers?  At first glance I think that any type of jitters in those two by towers would send investors back into the US dollar money market boosting the greenback.  Of course when that happens the looting goes the opposite way and it boosts Canadian cash prices for grain and helps our livestock exports into the United States.  The US dollar is still near its 15 month lows and it may be a few days before we see any type of currency implication from the Dubai problems.

Of course this is all an aside to our 2009 crop still languishing in the field.  Yes, your loyal scribe still has too many acres steering December in the face.  Ditto for many other Ontario producers some of who contacted me this past week with their own story of deciding to leave corn overwinter.

It all adds up to a good dose of uncertainty for our grain markets to work through.  We certainly didn’t need that, especially at a time when we have so much uncertainty left in the field.  For the good of everybody, let’s hope, “Dubai World” can scratch up a few bucks.