There are many things farmers need to consider when making business decisions in volatile markets, including geopolitics, interest rates, currency fluctuations, market demand, and weather.
Meteorologist and market analyst Sean Hackett says it’s important for farmers to have a good understanding of all the factors that can influence prices to develop an effective marketing strategy. Masu. At the Ontario Grain Farmers Annual March Classic meeting in Guelph this week, Hackett, president of Hackett Financial Advisors, shared his thoughts on a number of market variables and indicators and how they inform strategy in the short and long term. He talked about how it could have such an impact.
In an interview with RealAgriculture’s Bernard Tobin, Hackett says it’s important to consider both non-weather and non-weather cycles. He began his presentation by looking at how a decline in the value of the U.S. dollar would affect Canadian farmers. “That means Canada’s currency will appreciate. And yes, Canadian prices will be inflated, but by half as much.” He says investors should consider hedging against the Canadian dollar. (Story continues after video.)
When it comes to interest rates, Hackett says they tend to go through cycles of 35 years of decline followed by 35 years of rise.
“We are now in a cycle of upward trend after 35 years of stagnation,” he says. This is usually followed by higher capital costs and increased agricultural costs. It’s also a tough time for government balance sheets, meaning higher interest payments and the need to print money leading to further inflation. “The last time it happened was in the 1970s, and we know what it was. It was a very inflationary cycle.”
When it comes to weather-related cycles, Meteorologist Hackett says the intensification of extreme weather fluctuations will continue for 10 to 15 years. In the video, he explains how reduced solar activity is changing the airflow pattern of the jet stream from bands to waves, which is contributing to the destabilization of the southern and northern polar vortices. .
“We’re in that situation right now. And when it’s amplified, we’re going to see extreme fluctuations in weather: record cold, record heat, record snow, record flooding.” , and that can happen very quickly,” Hackett said. “We’re going to be stuck in this increasingly unstable weather cycle until the sun returns to normal again.”
What can farmers do to reduce that risk? Mr Hackett said the market would be a great opportunity for livestock producers to purchase feed. He encourages crop producers to seriously consider crop insurance, which continues to expand. “And obviously I think we’re looking at ways to use futures and options to manage risk on the farm.”
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