I had to laugh when I read DTN Analyst John Sanow’s column “Opportunity Lost” where John talks about his love of the Minnesota Vikings and how disappointed he was when they lost another NFC championship game this past weekend.  John related his love for the Vikings to our grain markets as an “opportunity lost” for the Vikings to win a Super Bowl and for farmers to have taken advantage of prices before the past January 12 USDA crop report.  The Vikings by my count have been in five NFC championship games.  I asked John about my problem.  As an avid Detroit Lions fan ever since I was a kid, my team has won one playoff game in 53 years!

So if I related the Detroit Lions to the grain markets ever rebounding, it’s never going to happen.  In southwestern Ontario the Detroit Lions have an avid following and is hard as it is for many of you to believe some of us think they will win someday.  But let me tell you, those grain markets will come back several times before that happens.

It is kind of funny where we find ourselves.  There are practically no bulls left in the pasture.  For instance it feels to me that we are all living in Grand Prairie Alberta where the Grizzly Bears grouse in the canola fields all summer. After the price break, which we saw after the January 12 report it seems like everybody has gone over to one side of the boat and the Bulls have jumped completely off.  Needless to say, even though it feels that way for Canadian producers there is a double edge sword.

Of course the double-edged sword to any Canadian grain price has to do with the Canadian dollar.  On my twitter page today I asked with all the doom and gloom on the farm concessions what I could offer to Ontario farmers in terms of hope for the future.  Of course the standard answer would be the potential for increased demand from China, 2010 weather and our Canadian trump card, that being the Canadian loonie.  In my mind there is no other reason for hope in the 2010-grain marketing season than the value of the Canadian dollar.

Simply put the gyrations of the Canadian dollar giveth and taketh away.  In 2010 it’s pretty obvious to me the value the Canadian dollar has more potential to give than to take away from grain producers.  Ditto for our livestock sector.  Look at our recent history.  The Canadian dollar plummeted to .7749 US on March 12th 2009 only to rebound in 10 weeks to .9265 US on June 1st.  It then fell back to .8577 US by July 8th and then turned around again topping out at .9370 US on August 3rd.  So now on January 28th, we are sitting at .9396 US having come down from .97 US only ten days ago.  The question is can we expect to have the Canadian dollar go down to .7749 US the same as it was last March?

The point being if the Canadian dollar went down to the same value that it was in March of 2009, we would have probably a positive three dollar basis on soybeans which would effectively put cash prices close to $13 a bushel.  Even in the last 10 days as we have seen the value of the Canadian dollar go down relative to the US dollar basis values for soybeans have turned positive in Ontario and much less negative for corn.  Follow the futures market as much as you want but the reality is in 2010 there are huge marketing gains to be made from managing basis risk.

For Canadian producers this basis appreciation has taken some of the sting out of lower futures prices.  The key factor though to remember is how this works compared to the American dollar and trying to capture market opportunities when the basis turns around in Canadian terms.  The futures market might be the sexy thing to think about, but at the end of the day the Canadian basis is what makes the Canadian price.

The question is does the Canadian dollar have $.80 and its future?  The answer is yes but of course nobody knows when that’s going to be but based on history of only 10 months ago who is to say it can’t happen again.

A double-edged sword part of that of course is as a US dollar goes up, futures prices go down and the Canadian dollar goes down and basis levels for grain go up.  So in many ways it is like the grain marketing teeter-totter.  The challenge is to catch the profitable price in Canadian terms despite the undulations in both parts of the market, which makes up our cash prices.

What about my Detroit Lions?  Unfortunately, unlike John’s Vikings they’ve been stuck on the bottom end of the teeter totter for years with nobody on the other end.  So keep in mind it’s not that way for grain prices in Canada.  There is still hope especially going into late spring, as the combination of futures and a boosted basis through Canadian dollar depreciation will net you a profitable price for 2010.   Don’t say it can’t happen.  We were there ten months ago, and we may surely get close to that again.