The Good: After spending part of last week in an alternate reality, the loonie has finally moved back towards the 71 U.S. cent level. The Canadian dollar has bounced in a trading range between 70 and 72 U.S. cents since rallying above the 70 cent level on March 25th. The recent move comes despite the fact that the crude oil prices are rallying from the bottom set two weeks ago. The fundamentals for the Canadian economy have not changed significantly over the past month. The economic data has been bad and will get worse over the next few months. Fundamental to the Canadian economy is trade and agriculture is one of the few sectors that is performing well. The largest Canadian export sector is oil and petroleum products, which are likely to remain poor for the remainder of the calendar year. This weakness in exports is going to be a large negative for the loonie through this year. And that is good news for exporters that still have a robust market like grain and oilseed exporters.
The Bad: Oilseed prices took a major dive in trade today as trade war fears moved back into the market. After posting some modest gains late last week as China purchased some soybeans for both old and new crop delivery. MarketsFarm felt that this may be the start of a seasonal rally. The politicians had other ideals and it appears that the U.S. is going to try to pin the tail on the Chinese for the coronavirus blame game. This pushed soybean bulls to the sidelines and we dropped back to the lows of last week. The drop in soybeans also impacted canola and other oilseed markets today. Without a rebound in Chinese purchases, U.S. soybean ending stocks will balloon not only this year, but also in 2020-21.
The Ugly: Lost in the news cycle last week was the Statistics Canada official numbers of GDP growth in February. This is past history of course as the COVID-19 lockdown was only a couple of weeks away. The GDP in February came in at 0.0 per cent – in other words no growth during the month. It is important to remember that the COVID-19 lockdown had not shut the economy down at that point in time. There are still going to be rocky days ahead for the Canadian economy. The road to recovery is clearly a marathon and not a sprint.