Under the Agridome

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It has been a cold week in this part of southwestern Ontario, but it's that time of year when things definitely turn around. Wouldn't it be nice if, by the end of next week, I have some corn in the ground? Add a little bit of good weather to that with some warmth and it will be good for the soul. It's always nice to hit that autosteer button, as planting 100 acres is sometimes much easier than thinking and preparing for it.

It will also represent a new day for agricultural markets. Anytime that planters are in the field there is more risk that has to be measured. That can be transcended into some seasonal realities where often we get better prices come June and July. Of course, this past spring has been one of geopolitical tumult. It's led to some pessimistic outlooks, but maybe, just maybe, we will avoid some of the more dire predictions.

Case in point was the announcement last week that the Bank of Canada maintained its overnight target rate of 2.75%, the benchmark for all interest rates in Canada. The bank decided to stay the course but also acknowledge the uncertainty all around us within the Canadian economy. In fact, the bank outlined a couple scenarios in its April monetary policy report. In the first scenario, tariffs were limited more in scope and inflation remained around 2%. However, in the other scenario tariffs were higher with a protracted trade war. This caused the Canadian economy to go into recession this year and inflation to rise to 3%. Clearly, it is an uneven road ahead.

In the days preceding the announcement I didn't really know what might happen. It was pretty clear to me that the "certain uncertainty" that we are experiencing would be bad for the Canadian economy. I've also looked at the latest tariff musing as highly inflationary which would ultimately mean higher interest rates, so keeping the overnight lending rate at 2.75% was a bit of a surprise to me.

At the same time as all of this has been happening, we have had a fairly major drop in the value of the U.S. dollar. For instance, we have had about a drop of 10 index points in the U.S. dollar since the first part of February. On the contrary, the Canadian dollar has acted in concert with U.S. dollar by going in the opposite direction. It is risen about US$0.03 in the last six weeks.

This is significant in a number of different ways. For instance, with the U.S. dollar going down, that generally is positive for our agricultural futures prices, especially wheat.

Unfortunately, with the U.S. dollar going down and the Canadian dollar going up, this is negative for Ontario and Quebec cash grain values. However, that new half million-dollar tractor that you want might be a bit cheaper!

I'm tongue-in-cheek with that last comment, as we all have an appreciation for how prices have risen during the last several years. However, as Canadian farmers we need to have a deep respect for how foreign exchange affects not only the prices we receive for our crops, but also for the inputs that are needed to grow them. This was not predicted whatsoever, but if we continue to have weakness in the U.S. dollar and strength in the Canadian loonie, it's a totally different ball game with regard to projecting where Ontario and Quebec cash grain prices will go.

That's one reason that having standing market orders ready at your grain elevator or processor are so valuable. My grain marketing I've never put out there as an example of what people should do, but I recently had a cash grain market order hit with the $0.69 Canadian dollar and a spike in corn futures prices.

Looking ahead, in the unlikely scenario where the dollar hits US$0.82 this fall, those cash price opportunities will be long gone. At the end of the day, of course, nobody knows -- but when opportunity knocks both from a foreign exchange and futures price perspective, we need to pounce on those opportunities.

Clearly, 2025 is a challenge especially while farming within a trade war and "certain uncertainty". However, cash prices for old crop corn and soybeans are at $6.18 and $13.40 a bushel, as of April 17. We might not like those prices compared to the last few years, but we're still a long way from being unprofitable. Sure, wheat is just over $6 a bushel, but let's all look the other way for the moment. Maybe things will not get as dire as I had earlier predicted within these very unusual economic times.

At the end of the day, I hope all of you have a happy Easter. In the next few weeks, we will all be hitting that autosteer button. It's time. There might be a world of risk in front of us, but it's nothing we haven't faced before. Let's all hope for a better day and a safe planting season.

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Philip Shaw can be reached at philip@philipshaw.ca

Follow him on social platform X @Agridome

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