While U.S. farmers are adjusting to significantly lower grain prices, declining currency values have buffered growers in Canada and many other parts of the world. U.S. futures have dropped off, but cash values in Canada have maintained their value, and in some cases, have risen, thanks to the weakness with the Canadian dollar.
“The devaluing of the Canadian dollar has really helped move our wheat basis from negative levels to pretty good positive levels, while with canola we’ve see it manifest itself in the futures market,” explains Brian Comeault, market analyst with Cargill,
The currency effect is also evident when comparing current-year exports to historical averages in Canada and the U.S. Canadian exports are ahead of average while US wheat movement overseas is well behind. As Comeault notes, traders are expecting the USDA will cut its 2015-16 export target for wheat in its monthly estimates to be released Tuesday.
So what would happen if the loonie started to climb? Is that a risk farmers should protect themselves against? Comeault discussed the continued trend lower, what it means for basis and his currency take-home message for producers at the 2016 St. Jean Farm Days: