U.S. financial crisis affects Prairie farmers
Uncertainty in the financial markets has spread to commodities, hitting Prairie farmers in the pocketbook.
Prices for wheat, barley and canola, which have been falling since the summer, took a nosedive over the past two weeks.
The record highs of last spring are gone, and some commodities are worth only half of what they were a few months ago, said Dave Reimann, an agricultural market analyst with Informa Economics in Winnipeg.
Minnesota wheat — the benchmark for most red spring wheat traded in Canada — peaked last winter at $13 per bushel for December delivery, but was going for $7.06 per bushel Friday, he said. Similarly, November canola that was at $770 per tonne in early July was worth only $431 Friday morning.
"Most market analysts have been trying to advise producers to do a little bit of forward selling," he said.
"Many have, which hopefully will insulate them to some degree from this. But if you are just coming off the combine and haven't got anything pre-sold, it's a painful week, for sure."
Reimann admits the prices on some commodities were artificially high, and that a drop in prices as supply increases at harvest time is not unusual.
But the problem has been exacerbated by uncertainties in financial markets south of the border, he said, adding he expects prices to drop even further.
A decision by the U.S. Congress on a revised package to address that country's mortgage finance crisis could help to stabilize markets and send prices for agricultural commodities higher, he said.
"I would suggest that it would happen almost the next day — that as soon as you see some reaction to this, that the market will come back and see some short covering and bring on [a] bounce," he said.
"My question is, how long does it last?"
Reimann advised farmers to watch for small rallies and sell whatever crop they can.
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