Deflation continued in ag markets over the past week. Fallout from the coronavirus pandemic dominates the headlines and is the main factor driving price in most markets.

 

The effect on the economy has been huge. Unemployment has shot through the roof, as many non-essential businesses stay closed. Government payouts to individuals and businesses are unprecedented.

 

Debt is increasing everywhere, especially at the government level. Individuals feel poorer, especially the newly unemployed ones. Businesses are obviously suffering as well. There is no doubt the fiscal stimulus is required.

 

Stock markets are good predictors of what the economy will do down the road. World markets, including the TSX, have recovered a good portion of the losses incurred since February, when the pandemic started.

 

Many jurisdictions are thinking of easing up on the current restrictions. Even if they do, it will take a long time for the world to be back to where it was before this all started. Some adjustments people make may turn out to be permanent.

 

Grain fundamentals were updated by USDA on April 9. There were no big surprises in the report. Corn for ethanol was lowered 375 mln bu., but this was expected. Feed usage was bumped up 150 mln bu., but the carryout (CO)was still was increased 200 mln bu to 2.092 bln.

 

The soybean CO was raised 55 mln bu to 480 mln. on a drop in expected exports. The wheat CO was raised a minor 30 mln bu to 970 mln, as it’s staying right around the 1 bln bu., where it’s been for years now.

 

Brazil’s soybean crop was dropped 1.5 mln mt., while Argentina’s was dropped 2 mln mt. However the world soybean CO will still be over 100 mln mt., so no shortages are imminent. Brazil’s corn crop needs a drink. Their currency remains weak.

 

Livestock prices fell further into the abyss, especially hogs. Producer prices are weak, as many processors in North America have cut back or shut down due to CoVid-19. Hopefully they will reopen soon. This is an essential service, for sure.

 

It is surprising to me that the 50 percent increase in the carbon tax wasn’t postponed in view of what is going on. Firstly it is a regressive tax, as poorer people feel the impact more. So while the federal government is paying out huge, it is taxing more with the other hand.

 

Agriculture is a huge user of energy and this tax will hurt farmers. It is the last thing producers need now with the very low prices in all ag markets. Meanwhile ag is the largest contributor to reducing our carbon footprint, but gets no credit for that.

 

Frank Backx.

 

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