Archive for the ‘economy’ Category

The Economy and Your Farm

January 10, 2009

Yesterday, I spent some time talking to Dr. Danny LeRoy, Associate Professor of Agricultural Economics at the University of Lethbridge.  We spoke at great length about the economy and the affect it will have on agriculture.  I was speaking to Dr. LeRoy for research that I was doing for my Grainews column.  To say that Dr. LeRoy is concerned about the situation would be an understatement.  Here as excerpt from the column that I wrote to be released in the next issue of Grainews.  

I spoke with Associate Professor in Agricultural Economics at the University of Lethbridge, Dr. Danny LeRoy about what will be the impact of this economy on farmers.  Dr. LeRoy states that “realistically the amount of agricultural products produced is not going to substantially change in 2009 but the environment and risks for farmers will.”  Dr. Leroy continued, “The farms most at risk are the ones that are relying on cheap credit.  If interest rates were to rise due to inflation with commodity prices continuing to drop, it will be a shock to the farming system.  It might create a financial situation that reminds us of the 1980’s.”

As Dr. Leroy stated to me, the two things that farmers need to be the most concerned about is currency volatility and regulation.  Speculation is growing that the Canadian Dollar could be headed higher again in the next twelve months.  This feeling is present due to the continued spiraling economic situation in the United States and oil is bound to catch a bullish move based on the over selling that has taken place in the last 6 months.  The new administration in the US seems to be leaning more towards protectionism on agricultural products which is a  significant threat to Canada.  Use what we learned from country of origin labeling and be fearful of these sort of trade tactics.  
Sometimes all of this economic and political talk seems not applicable to our daily concerns but the reality is that it is closer to the farm than you think.  With agriculture in Canada needing trade to survive in the long term, regulation and currency are huge concerns for Canadian farmers in this poor global economy.    

The Market Goes BOOM!!!

September 29, 2008

I am sitting in my office completely drawn to CNBC’s coverage of the capitulation of the US economy. The story is riddled with denial, accusations and lack of clarity. The question that keeps on getting raised in our office is, “how does this affect our company.” The DOW is down 700 points and maybe headed to 8500 according to Jim Cramer of CNBC. Realistically, I do not think that we will really know the full affect of this issue on the Canadian farm for 3 – 5 years but two concerns come to mind immediately.

There are two Canadian industry concerns that come to my mind:

  1. North American Beef consumption–Beef has traditionally been known want instead of a need. Basically, when a family goes shopping for groceries are they more likely to buy bread of beef? Based on the trend of increasing feeding costs, as an industry we need the price of beef to rise not fall. As feeders we need profits not a round of $100 head losses. A downturn in beef consumption would not help our cause at all. If the American consumer has a shortage of free cash flow it only makes sense that eventually demand will slide and cash bids will shrink.
  2. Ag Lending constriction–Canadian banks are significantly capitalized but the reality is that I think they may take a heavy reactive reaction to the US banking implosion. Would you be surprised if Canadian Ag lenders tightened Ag lending requirements because the US banking system imploded… neither. In the past when Enron and the wireless industry fell, the lending institutions tend to clean up their portfolio of loans which will not help Ag accounts.