Of all the factors that affect crop and livestock prices, the value of the Canadian dollar will be the one to watch in 2010. Ontario-based market analysts Moe Agostino and Philip Shaw stressed the importance of the stronger Canadian dollar in their presentations at the Western Fair Farm Show in London.

Agostino, marketing commodity strategist for Farms.com Risk Management, is cautiously optimistic about the livestock markets in the months ahead. The one main negative factor in his outlook is the projection for the Canadian dollar to trade at or above par with the U.S. greenback.

 “The dollar has been trading in this narrow range between 93 and 98 cents U.S. But we remain bullish – we have been projecting par to $1.05 since the beginning of last year,” says Agostino.
 

On the positive side, lower numbers of cattle and hogs in North America and signs of increasing demand bode well for higher prices. The seasonal upswing in prices is another reason for optimism.
 
Setting the scene for the cash crop markets, Shaw said the crop reports from the United States Department of Agriculture on March 10 created a bearish tone for corn, soybean and wheat futures in Chicago.

For corn, the Dresden-area farmer says the USDA estimates large supplies, pegging the size of the 2009 U.S. corn crop at 13.13 billion bushels and ending stocks at 1.8 billion bushels. On soybeans, Shaw says the prices will be pressured by the huge crop from South America as Brazil and Argentina are setting production records. As for wheat’s situation, Shaw says it may be the most bearish of the three, given the burdensome U.S. carryout of 1.8 billion bushels.

While it will be important to watch how weather and planting conditions in the U.S. will change the tone of the futures market, Shaw suggests that Ontario farmers should pay closer attention to the Ontario basis. “Cash prices are reality and that means we have to think about basis –  the difference between the cash price and the futures price,” says Shaw.

“Everybody likes talking about futures but what I’m telling you today is that we should concentrate on these basis levels because there is tremendous volatility in that dollar – and tremendous opportunity to market on the basis.”

The full story is in the April 2010 edition of The News Feed.