The Good: The Canadian dollar dropping is not usually put in the good news category, but it certainly will help support cash prices if the trend continues. Today’s drop in the currency futures was close to one cent to 73.50 U.S. cents. Markets are quite volatile, but the loonie is likely to work its way back to the 70 to 72 cent range that persisted through most of April and May. The fundamentals for the Canadian economy continue to be challenged, especially the petroleum sector. The largest net foreign currency gains in Canada come from the petroleum sector and the drop in amount and value of oil exports impacts the balance of trade. This will over the long run reduce the value of the Canadian dollar. That is good news for the agricultural sector.
The Bad: The drop in the wheat markets certainly was warranted given the bearish numbers that USDA released during the session. Increased wheat production in the global and U.S. numbers was enough to push spring wheat futures lower. The September contract has broken some key support levels in the upward channel that wheat has been trying to establish over the past month. The good news is that support is only five cents per bushel below the current levels. Of course the bad news is that the market is likely to test that level over the next few trading sessions.
The Ugly: There were a number of contenders for the ugly move of the day, but the Dow Jones Industrial Average (DJIA) was smoked today and lost 1862 points to 25,128 points. This drop of 6.9 per cent brought the markets erased most all of the gains posted last week. The real fear is that the markets will continue the sell off tomorrow and into next week. The surprise was not the market pull back, but how fast and broad the selling in the equity markets was during the day. Tomorrow will be a very important day in both the Canadian and U.S. markets.