Positives amid volatility for ag sector

Farm commodity markets may be facing a time of volatility based on a number of factors, but there are positives for Canadians farmers too.

Two positives at present are the Canadian dollar and interest rates, offered Craig Klemmer, Principal Agricultural Economist at Farm Credit Canada, speaking at the FCC Young Farmer Summit in Yorkton last week.

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Klemmer did note, and the Summit was pre-the major announcements regarding COVID-19 in this country, that Canada’s gross domestic product (GDP) is slowing, with a likelihood of negative growth in the second quarter of 2020.

“The reality is Canada’s economy is slowing. The world economy is slowing,” he said.

The slowing was likely to be made worse by the day’s announcement that COVID-19 was a pandemic.

On the farm side, the rail blockages, while ended, left the system behind.

“It will take a while for the backlog to be cleared up,” offered Klemmer.

The impact of lower oil prices plays on all commodities too, said Klemmer, adding the current “oil war is a battle of egos right now,” between Saudi Arabia and Russia.

Buffering the negatives are interest rates with a downward trend in 2020, with the biggest question being how low interest rates may go, said Klemmer.

“Right now interest rates are going to be favourable,” he said.

The combination of lower oil prices and lower interest rates leads to “a softening of the Canadian dollar,” said Klemmer.

With oil being Canada’s biggest export “we’re expecting the Canadian dollar to trend lower,” he continued.

The softening of the Canadian dollar “really is a good thing for the agriculture sector,” said Klemmer, adding it makes Canadian exports more affordable to other countries.

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