The Good: Stock markets have recovered most of the losses due to the COVID19 outbreak in early March. The TSX composite index gained 42.70 points today, after trading lower for most of the day. Comments from the Bank of Canada governor, Tiff Macklem today helped turn trading positive by the middle of the session. The comments were interesting as they were the first by the governor regarding the Canadian economy. The economy is expected to grow strongly over the next few months as the economy emerges from the lockdown. The governor did not rule out additional quantitative easing the coming months to support the economy. The market took this as positive news which helped boost the index into the close.
The Bad: The Canadian dollar strengthened today on the comments from the Bank of Canada. The nearby September contract for the Canadian dollar closed at 73.95 U.S. cents. Weakness in the U.S. dollar also boosted the loonie in trading today. The U.S. dollar index closed the day just above the 97 point mark. Pay attention to the recent dollar index low of 96 points as a breach of that level would point to testing the 95 point mark set in March. This certainly would provide support for the Canadian dollar, which is not good news for farm gate prices.
The Ugly: If you want to take a look at an ugly chart, have a gander at the nearby lean hog futures chart for the past 10 years. You can quickly see that prices are currently challenging long term lows at 49.9 cents per pound. These low prices will eventually push hog numbers in the U.S. lower as these prices are unprofitable. The good news is that these prices will result in additional demand during the summer due to the low prices at the retail level. The drop in hog numbers will impact feed demand in the U.S., which will further pressure corn prices. Not good news for the new crop corn contract!