USDX

[poorboy]

Cotton,

So what is your take on the CDN $? As the US$ turns into a weaker item it causes commodities to rise in US$ and the CDN$ to get stronger. So is selling canola today in CDN$ going to net the same value as selling in CDN$ in a couple months time. Ie. will canola stay static because as the canola value climbs in US$ it is offset by the stronger CDN$.

Trying to think of how this is going to effect canadian farmers. My impression is that I will end up with almost the same price. Should we be forward selling canola and wheat because of the oversupply situation, or keeping it all unpriced in the bin because of the huge influx of money into commodities?

Always interested to read different opinions and ideas and like to have the reasoning behind them.

Thanks for sharing your opinions with us and trying to explain them.

[cottonpicken]

There is a slight offset as the cando rises but it is not as bad as some make it out to be.

First of all everything imported becomes less expensiveto us.

Second the rise in commoditie prices will not be proportianal to the rise in our dollar.

Third our governments are making every mistake in the book economically so that will help keep a lid on the dollar.

Fourth as much as people consider us a commoditie currency-we really are not.We are a consumption based economy and most canadians are about to get kicked in the nuts.Probably not western canadians.

Expect western sepertism to become a major issue when the transfer payments of western canada into hongcouver and chinaonto and quebec***** city become OBSCENELY RIDONKUOLOUSLY HIGH.

[poorboy]

So Cotton,

You are expecting commodities to rise faster in price than the dollar will climb to offset it? Just making sure that I am following your thoughts correctly.

The stimulus money that the CDN gov't has been pumping into our economy is going to slightly weaken our $ against other world currencies.

So are you thinking we are heading into a deflationary time or an inflationary period? I assume that interest rates will hold low if we are deflationary, but will climb significantly higher if inflation is coming.

I am thinking that with the "kick in the nuts coming to average canadians", that we are going into a deflationary period.

In simple terms, what would your outlook be for western canadian ag? Should we be very careful and if we have debt on floating interest rates start locking them into long term fixed interest rate mortgages? Or is it the idea time to expand the farm and borrow money for land and/or machinery because of the increasing value for commodity prices?

With the reduced sales world wide and factory slowdowns, why is the demand for oil still so high? I would assume that if things stay economically tough that gov't will stop making ethanol and bio diesel inclusion in fuels mandatory and that will cause oilseed values to drop.

Not sure if we are at the next step in the Great Depression chart, or at the next step up for the great commodities rally.

[Hopperbin]

Poor boy one thing is for sure, our banks have more to gain by foreclosing on us than loaning us more money. Haven't you ever been to a credit union meeting where the topic of losses come up from farmers going broke? There aren't any, when a farmer goes broke they gain. So today is not likely the day to start borrowing too much money. Is your crop even off? Have you sold it yet? Are your imputs bought for next year?

[cottonpicken]

The first questions-you only need to re-read my post.

What a guy should do-no advice his choice,not going to give anyone a scapegoat,standard business rules apply.

Everybody seems to forget here that the seventies was a rescession.

[poorboy]

I am lucky enough to have my crop harvested. I have sold 50% of my canola at decent prices. Have sold 0 wheat and hope that the CWB comes through in the pool account.

I am not looking to base my whole opinion on one person and go with it. I am just looking for more opinions with supporting reasons to base my own opinion on. For example if the posts just say that canola is going to $20, that is great, but I kind of want to know what you are basing your gut feeling on.

I was not farming in the 70's and do not have a lot of experience there, so I am trying to learn and not repeat a lot of mistakes made in the late 70's. I remember that 76 77 were great years for grain prices, much like 2007 2008 were. Then the price of equipment and land skyrocketed because farmers had money. Next thing I remember is that interest rates were extremely high in about 1979-1980, with rates of 20%.

But I don't remember what the commdity prices and yields were in 1979 1980. If the farms had locked in long term mortgages at 6-7%, would they have been fine in the late 70's early 80's, or were the prices so poor that any kind of debt was a no-no.

I am worried that we are sitting at about 1978 in the current outlook. If we were not in such a deep recession, I would suggest that the overproduction of wheat and the current outlook for massive corn and soybean crops suggests lower prices are here for a couple of years. Most times in an oversupply situation, it pays to sell most of your grain early in the year, and forward price some for next year early as well or hold it all for a couple of years. I feel that if the recession deepens then consumers will be forced to cut back more, or gov't will have to tax heavier and force consumers to have less disposable income.

Just hoping to bounce ideas back and forth, as production is my area of strength and marketing is an area that I could use more lessons in.

[cottonpicken]

The difference between now and the late seventies is we could handle 20% interest rates -just barely.Different moment in time.

If it happens now-what would our economy look like?

The phrase "rock and a hard spot" is the best way to describe whats going on.

Sound monetary policy would hurt us so badly it may kill us.
Bad monetary policy(inflationary)will keep the party going a while longer "and in the end were all dead anyway(keynes)".

Personally i'm o.k with what ever route they take because i would sure hate to be in their shoes making those descisions.

[jensend]

the point cotton brings up about the difference from the seventies is what makes me think things might be a little different this time around. in the seventies we had inflation then the high interest rates and a recession. i have to think we saw a round of inflation last year and it killed the economy which is now on life support with stimulus and they're hoping it will survive but that's not certain. i think more inflation would collapse everything and we would see massive unemployment and bankruptcies. eric sprott and nouriel roubini did agree on one thing on bnn and that is that unemployment has become a leading indicator and it has always been thought of as a lagging indicator. paul van eeden of cranberry capital put it in a different perspective in august on bnn when he said this isn't a recession. you have a recession after a buildup of inventories and the economy slows down for two or more quarters to get inventories back down. he said we didn't have the inventory problem we had a credit bubble and after a credit bubble you have a depression.

[Hopperbin]

Cotton there is one other difference between then and now, a big one. Then banks were borrowing farmers 100 percent of the money to purchase land sorta like the prime rate housing loans in the states a few years ago, the price of land was supposed to keep rising. When interest rates went up farmers that borrowed big were paying high rates of interest on the value of the entire farm. Today or last time I took out a loan the max. loan offered was much less than half of its purchase value. Which brings me to the confesion that banks at one time did lose money on farm loans.