Russia Grain Export Ban may Help CAD

Due to a horrible drought, Russia has announced it is banning grain exports form mid-Aug to the end of the year. A state of emergency has been declared in many crop growing regions. The most important grain is wheat and the price of wheat is jumping to 2-year highs. The government has cut its crop forecast to 70 mln metric tons. The crop ws around 97 mln tons last year. Agriculture accounts for a small part of Russia's GDP, so growth forecasts are unlikely to be cut very much.

On the other hand, North America is reportedly poised for a bumper crop. Given the agriculture is more important for the Canadian economy, the Canadian dollar may a beneficiary and it surely is out performing today. In terms of the US dollar, there are more significant drivers, but on the margins it may boost US agriculture exports and on the margin help improve the trade deficit more than otherwise might have been the case.

Another implication is that headline inflation pressure from foodstuffs may exacerbate the challenge of many countries, especially in Asia which are wrestling with relatively strong economies and price pressures.
Russia Grain Export Ban may Help CAD Russia Grain Export Ban may Help CAD Reviewed by Marc Chandler on August 05, 2010 Rating: 5
Powered by Blogger.