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The other markets

Agriculture.com Staff 02/01/2008 @ 3:01pm

The corn and soybean markets appear to be poised to invalidate the price reversal made two weeks ago. No technical system is fool proof. That is why I priced only 20 percent of the crop I have available for sale. So seldom do prices peak in January or February that I was not willing to bet a big percentage based on what happened after the January crop report. It will take only a few more cents higher in either market to make it appear that the rally will continue.

One of the subjects I have had on many of the programs I have done in the past year has been currency exchange rates and the effect they have on grain prices. I find that United States farmers know about exchange rates in general. However, Canadian farmers have a much greater knowledge about the details of exchange rates and how they affect farm prices.

Since about February 2002 the value off the U.S. dollar has fallen and the value of the Canadian Dollar has increased. This is a huge trend that ran for over five years. When it began it had the effect of keeping U.S. Grain prices low and Canadian grain prices higher. As the relationship reversed, so did the relative price of grain. Where earlier Canadian grain prices were much higher than those south of the border, today they are almost equal.

The trends for the two currencies continued until November of 2007. Since that time, the Canadian dollar has dropped about ten percent. The U.S. currency has rebounded a similar amount. While this has helped Canadian farmers somewhat, the relative values are no where near where they were six years ago.

For U.S. farmers, the weakened dollar is a major contributing factor to the high grain prices. More important than what it has done to the Canadians is the effect on exports. As currencies in importing nations strengthened, they could afford to pay more for the same bushels or buy more bushels at the same price. This has kept exports strong in the face of prices that are very high to farmers in this country.

Maybe just as important is the fact that the Brazilian Real has also strengthened. This means that soybeans in that country are no where nearly as high priced in their currency as ours are in dollars. This has dampened the ability of Brazilian farmers to expand acres as much as the soybean users had hoped they would. This also helps to keep prices high in the U.S.

Exchange rates have stabilized in the last two months. Currency exchange rates are available almost anywhere commodity prices are quoted. It is worth the time of anyone who has grain to sell to be aware of that market. What happens there is a big factor in pricing what is grown on our farms.

The corn and soybean markets appear to be poised to invalidate the price reversal made two weeks ago. No technical system is fool proof. That is why I priced only 20 percent of the crop I have available for sale. So seldom do prices peak in January or February that I was not willing to bet a big percentage based on what happened after the January crop report. It will take only a few more cents higher in either market to make it appear that the rally will continue.

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