Weakened US Dollar what does it mean for Canadian Ag?

Over the weekend India purchased 200 MT of gold.  This amount equals 8% of the world’s total output in gold.  Did they buy the gold  because they have high hopes and are very bullish on this commodity?   Partly yes but more due to the fact they  wanted out of US dollars and needed a more stable investment, so they liquidated their US dollars and bought gold.  The international monetary fund confirms that more and more countries are liquidating US dollars and purchasing gold.  Which looks like it is going to provide a very good return as long as it is not on a bubble. We have seen the Canadian dollar rise against the US recently and it is not because our robust economy or any super bright future out look.  It is due to the fact that the US dollar continues to weaken on the world markets and will most likely stay weak for some time.  The US dollar affects AG commodities very similar to any other products exported in Canada.  The higher Canadian dollar makes our corn, soys and wheat more expensive in the US.  In other countries it could be the other way so direct exports elsewhere is a good possibility.  However there is another way though that the higher Canadian/ lower US dollar affects AG that other is does affect other exports or commodities and that is effect on our crop basis. The closer the exchange rate the smaller (lower)the basis (usually) and the lower the Canadian dollar vs the American the higher the basis (double usually).  Right now in many areas we see very little basis and on some crops even a negative basis.  We will really need to rely on market demand and supply to move the basis anywhere, at least more than we have in the past.  We saw this especially with corn through July August where we saw strong levels for local basis indicating lower supply but continued demand.  The futures where lower based on speculation.  Now we do not have a weather market on our side for the futures market but we do have a lower yield in the US which when final tallies come in will help at least our futures price.  I think will we will really need to keep an eye on the futures to see any real gain in the markets especially around the USDA reports.  Reports of lower US yields will really help us now or an alien invasion in the US.


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