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Wow!!!! China’s got a whole bunch of people!
And they don’t have much land or water!
That should be great for us as people involved in agricultural production, right? Check out the chart below:
Canada's got lots of both. China's got little.
That was one of the many charts supplied by Rabobank, the international Dutch lender with a particular interest in agriculture, in a presentation I listened to recently. The Rabobank analyst who gave it also appeared at the Banff Pork Seminar.
The chart above is the kind of thing people look at and then jump to conclusions, such as that China’s going to be importing more and more meat as its population, which is getting richer, eats more of the stuff.
But the reality is far less certain, analyst Chenjun Pan said in the presentation. China may not increase demand much for any meat other than offal and value-added, processed pork from abroad. How can this be? Doesn’t an urbanizing population naturally eat more meat as it gets richer? And isn’t it more efficient for China to produce more grain – a much more efficient way of producing carbohydrates, fat and protein than meat production – to feed its giant population and leave the relative luxury of meat production to folks like us, with wide open spaces and lots of water?
In a simplistic way, it does.
But Pan said other concerns occupy the minds of China’s policymakers, and she thinks China will prefer to import grain than meat in the future. I have a story coming out in this week’s paper about this topic, so I won’t go into it in depth, but simply put: China wants to have its own modern, efficient, job-providing meat industry and will likely buy crops from us to support that industry. Grain farming doesn’t provide many jobs and will provide less as, like here, it has industrialized.
This would obviously have implications for us, such as not providing the big surge in demand for meat that we hope for. And lots of folks in the meat industries are hoping for Chinese demand growth to lead to a golden future.
But the point I want to make here is that it is dangerous to make big assumptions about China, which is still much of a mystery to most of us. Before we leap to major conclusions about demand growth from the middle kingdom, we should first consider how much we actually know about China. Check out this map:
China's major cities
Now quick – name seven of those Chinese cities.
Ok, now more slowly – name seven of China’s major cities.
If you can do that, you’re a rare Canadian. Some industry consultants can name a lot more than seven, but how much they actually know about them is an open question. And how much any of us know about how China’s political-economic decision-making process is another open question. Do any of us really understand exactly what’s behind China’s stand on canola and blackleg. Sure, we all speculate, but what do we really know?
So it’s nice for us all to fantasize about China, and dial in aggressive numbers into our supply and demand projections, but the reality is likely to be different than we can imagine. That’s always the case with everything, but I’ve noticed in markets chatter in the last few years that the China factor is used to justify every rosy projection imaginable, and that’s something we should be careful about.
China’s likely to be a bigger deal in a few years than it is now, but be careful presuming you can figure out exactly how it’s going to evolve, especially if those presumptions are convincing you to make decisions that have long term implications. Until you can name and spell out 20 Chinese city names, you probably shouldn’t rely to heavily on your assessment of the future demand of the Chinese market.
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Are you embracing this big bottom that’s before us now?
Are you mad we haven’t bounced up off it?
Or are you too dark-minded to see it as a bottom?
Across the crop markets, prices have stopped falling – for some time now – and a couple have been edging up. Let me show you four charts. Here’s Winnipeg canola:
Flat
Pretty flat, huh? Here’s Minneapolis Hard Red Spring Wheat:
Flat
Here’s Chicago Soybeans:
Flattish
And corn:
Sort of flatty
The two commodities of most interest to us – spring wheat and canola – are the flattest here, with both corn and soybeans showing a weak bounce off an at least near-term bottom.
But is this the new, long term bottom we’re all looking for?
An aspect of my job that has given me ample opportunity to discuss this with a number of analysts is the conference coverage I do most weeks. Especially in the mid-winter, from January to early March, there seem to be nothing but a fearsome phalanx of conferences calendaring their way towards me here in Winnipeg and around Manitoba that I have to run out and confront. The year always starts with my favorite farm show – St. Jean Farm Days in St. Jean Manitoba – and then picks up steam with events like Manitoba Ag Days in Brandon, the Manitoba Swine Seminar in Winnipeg and the Manitoba Special Crops Symposium. At most of these events – and it’s usually the highlight of the program and the most attended session – is the market outlook. This year I have seen a bunch of them, and quite a few were by the same two guys: Mike Jubinville of ProFarmer Canada and David Drozd of AgChieve. They aren’t connected, but they’ve both been visible this winter giving their in-depth takes on the longer term market outlook.
They are men of radically different perspectives: Drozd favours technical analysis while Jubinville emphasizes fundamental supply and demand factors. But they are both looking for the same thing: a bottom to the crop markets.
Both think crop prices have probably moved up into a permanently higher price range since the late 2000s commodity market surge. The collapse since 2008 doesn’t suggest that the range is going to continue to be the same one as in the 1980s-2005 period. The market’s got to find a bottom somewhere and then begin trading between the high (probably 2008’s peak prices) and the new bottom. But neither is sure where that new bottom is going to be. That’s why this flattening of prices and soft bumps up in the crop market charts above are so interesting. These could easily fulfill a desire to see a bottom forming.
It’s right on schedule for Jubinville. “I think we’re basing and may see a four to six week period rising into spring,” Jubinville said at the special crops symposium. That was a few weeks ago and doesn’t conflict with how prices have continued to chart. He thinks we’re in a $350 per tonne to $450 per tonne medium term range. The flatness recently lends weight to that view.
Drozd, who also spoke at the special crops symposium, thinks there’s a strong chance this is not yet the bottom. He, like Jubinville, sees the $350 line in canola as important. (I believe the exact support level he sees is $353.10) But there are a lot of bearish technicals that suggest it could give way, with the next support level beneath $320.
Neither of these guys is convinced they know where the bottom is. It’d be nice if we have already reached and never again fall under $350 per tonne for canola. Both would be happy if the recent flatlining proved permanent. But nothing is clear as gin yet.
However, boys and girls, I think we have some reason to feel a little more confident that we did a few weeks ago. And that’s a nice feeling as everyone gears up the big iron for spring. This bottom may be big and flat, but it’s a lot softer now in the $380s than it would be if prices skinnied up.
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As I walked out of the GrainWorld conference after the cattle market outlook last Tuesday, I pondered a problem that is stuck in the throat of the industry: beef’s declining popularity. A range of factors, from high prices of beef compared to chicken and pork to beef’s reputation as an unhealthy “red meat” is making beef stick in the esophagus of the eating public, and per capita beef consumption in the United States has fallen since the mid-1980s from almost 80 pounds per year to presently under 50 pounds per year.
A few hours later these thoughts were perhaps still trotting around in the back of my mind because I decided to cook steak for the family for supper. As I raced around the house, trying to control the toddler (keeping my steak knife out of two-year-old’s eager hands) and attempting to not step on my busily crawling 11 month old, I sliced a big piece of just-barbequed steak, chewed it a few times, revelled in the taste, and swallowed it down. Jeez, there’s just no beating the taste of a good barbequed steak, I thought. Or, rather, I half-swallowed it as I thought that. Because most of the way down, my esophagus gagged on beef the way American consumers have been doing, and that big chunk of steak jammed. Completely. Utterly. Couldn’t even get any liquid to get down past it.
Uncomfortable feeling.
I thought it would pass in minutes, or an hour. But later in the evening I decided that I would go to the doctor the next day if it was still jammed the next morning. Every half hour I’d have to tip myself down to jettison all the saliva that was brimming up in my throat, unable to be swallowed. The next day came, everything was still jammed and, after visiting two hospitals, I ended up collapsing in an emergency room, being strapped onto a gurney and rushed through the triage area of the second hospital. As I looked up as they wheeled me along, with the ceiling tiles and fluorescent lights passing by and people looking down at me and barking out orders for medical stuff, I thought of the very first and very last scenes of Carlito’s Way, a 1990s movie in which Al Pacino plays a gangster who gets shot – hence the hospital ceiling tiles scenes. That’s what Carlito sees. I know it’s odd that in a state of physical distress I was thinking about Carlito’s Way, but there you have it – the mind is a crazy thing. Or at least mine is. Al Pacino’s about my height, so it’s an apropos reference, I suppose.
Anyhoo, a couple of bags of IV saline solution and a good anesthetized scoping out of my throat by a specialist brought up the chunk o’beef, and I spent a couple of days on the couch, feeling beaten up and rather sore any time I tried to swallow something solid. I must admit that eating another steak was about the furthest thing from my mind, even further than cheering for the U.S. hockey team, which I am delighted we heroic Canadians defeated last night. (Too bad we didn’t pull a sudden death goal in that little hockey game we had with the Yanks at Yorktown in the 1780s, methinks.)
And I haven’t consumed anything as tough and fibrous as a steak since my little incident last week. Those kinds of events tend to leave a lingering queasiness.
But I laughed to myself Saturday morning when I found myself sitting at the Costco cafeteria – eating a beef burger. A half pound beef burger. Apparently the trauma of the steak-jamming didn’t turn me off the flavour of beef. In fact, as I chewed – slowly and many, many times on each mouthful – I couldn’t help thinking, jeez, this beef tastes great! Certainly a lot better than all that friggin soup and shakes I’d been eating. And I was annoyed that my toddler daughter kept wanting more of my burger. That was my beef and I wanted it! I considered buying another half-pounder for us to share.
Because here’s the moral of this long and odd story: nothing tastes as good as beef when it comes to meat. Chicken – you’ve got to put a sauce on it, or spice the heck out of it, for it to have much flavour worth calling “flavour.” Pork’s great, but just doesn’t compare to beef’s ability to deliver a knockout punch of flavour with no requirement for spices, sauces, disguises of any nature. What other meat can you just slap on the grill by itself – ground or steak – and eat and feel satisfied? Perhaps lamb, my British sheep producing relatives will tell me, I know. But I wouldn’t agree.
And that’s why I don’t think the beef market’s going away any time soon. There has been a multi-decade slide in beef’s popularity. It is no longer the default meat everyone eats for supper every night. And chicken, with its lower cost, will bite at beef’s butt, and pork will move in on beef’s turf as people learn to cook pork better. But there’s no replacing the pure, sensuous experience of eating a steak. And no one will put the burger down for the count. Those two are food superheavyweights and they aren’t going to suffer a TKO, even if they get a little bloodied and bruised.
When will beef’s slide stop? You got me. But I don’t expect I’ll still be around when it happens. And that’s not because I plan to die prematurely from choking to death on an unchewed chunk of steak. From now on I will chew every mouthful 40 times. Or so. No, I think I won’t be around to see the demise of the beef market because I plan to live to 109 and I’m sure people will still be eating lots of beef in 2075.
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Anyone groggy after last night’s entertainment of comedy and multiple refreshments got a jarring wakeup at this morning’s GrainWorld breakfast session:
Most commodity prices are in bubble territory.
That message was delivered by Peter Hall, the chief economist of Export Development Canada – a man who actually spotted the bubble in 2008 July and appeared in our newspaper saying so. That makes him a rare thing: an accurate economic forecaster. He didn’t foresee the size of the slump coming, but said everything looked dangerously overvalued at the time.
Now he’s saying that the signs of peppiness in commodities like the metals and energy are showing marked bubble characteristics and could be set for a bursting. This, however, would not this time necessarily be part of a worldwide economic meltdown. In fact, it could be part of the cure for the world economy. That’s because high commodity prices are holding back the manufacturing industry, which is the source of many of the world’s better paying jobs. Lower commodity prices would help those industries rise from the semi-dead.
The problem is, Hall said when I asked him about this, is that bubbles tend to burst rather than shrink. If there’s a big, wet bursting of the commodity bubble of today, it may panic people and drive them back into their caves and send the economy down again in the second dip of that W economic formation we’re hoping to avoid.
He told me bubble shrinks almost never happen.
However, if we see metal and energy commodities come down in price, and that stimulates economic growth, then the medium and long term outlooks for the ag commodities are good, he said. People around the world are piling into the middle class and the first thing the nouveau riche do is eat better.
So if we can survive the ending of what Hall thinks is the present bubble, things should be good for us. The problem is, how do you do that . . .
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Here are a few tidbits I found particularly interesting from GrainWorld yesterday:
1) The Canadian Wheat Board’s malting barley market analyst for Australia and the Black Sea region, Arvin Pirness, said Greece’s grave fiscal problems, which are undermining the Euro and have helped it drop in value, may weaken European demand for durum. A weaker Euro equals more expensive durum, in a world already filled with durum.
2) Informa Economics’ Chuck Penner said farmers shouldn’t expect the flax triffid problem with Europe to go away soon. He said these sorts of GMO issues tend to take years, not months, to resolve. The long term danger is that Europeans could learn to live without linseed oil. Fortunately the Chinese are buying our flax, crushing it and shipping the oil to Europe.
3) Penner also said farmers are likely to put even more acreage into lentils this coming season, and that’s scary for prices for the new crop.
4) Canadian Wheat Board commodity risk manager David Boyes said convergence problems with the Chicago winter wheat contract remain, but aren’t much of a practical problem right now. The prices still correlate with changes in the prices of wheat in cash market, so convergence of the contract with cash is less important than correlation with moves in cash. So, correlation matters more than convergence. There are a lot of Cs in those last two sentences.
5) Boyes also noted that “the funds” investing in agricultural markets are generally more of a positive than a negative. The constant holding of positions in ag markets by index funds creates a healthy level of continuing demand. I was glad to hear this, because I’m sick of everyone blaming the funds for everything that happens in the market that they don’t like. Later technical analyst David Drozd noted that market prices are in his view “exactly right” because every futures position has a willing buyer and a willing seller and therefore reflects peoples’ best assessments of the value of a commodity. Boyes humorously noted that he and his colleagues joke that market prices are, in fact, always wrong, which is why the markets change them every day. This got everyone, including me, laughing. That tells you what an odd crowd comes to GrainWorld, because 99 percent of normal human beings wouldn’t get that joke.
6) HSBC Bank’s Stewart Hall said his bank thinks the U.S. dollar has bottomed out and could be in for a sustained rise. But he suggested civilians – like farmers – not think they can easily play the currency trading game. That’s for pros. What should normal people do about their exposure to currency volatility like we’ve seen? Hedge. And that sounded about exactly right to me.
Now, back to the show for a breakfast commodity market outlook.
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Do you like today’s Pool Return Outlook prices for wheat and durum for the 2009-10 crop year?
If you do, you’ll like the 2010-11 PRO, which was just released moments ago here in Winnipeg. It’s today’s PRO prices minus about five bucks. If you don’t like present prices, you won’t like the Canadian Wheat Board’s projection for the coming crop year.
Hard Red Spring Wheat 13.5 protein is $236 per tonne, compared to the present 2009-10 PRO of $242. Durum is $197 per tonne for Number One CWAD 13 percent protein, versus $202 for 2009-10 durum.
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A leading weather analyst is predicting dry weather for the northwest Saskatchewan and central and northern Alberta (including the Peace River country) growing areas this spring.
Drew Lerner of World Weather Inc. in Kansas City, Missouri told the Canadian Wheat Board’s GrainWorld conference this morning that he expects “trouble in the west.”
That’s because certain weather patterns are suggesting that the crucial spring seeding period will see farmers in the areas I mentioned above get below average precipitation until into the summer. That would reduce the potential of those crops.
Across most of the prairies conditions should be good, with a cool, wet spring expected for Manitoba. Generally, conditions including a likelihood for a late frost this coming autumn, suggest most farmers should get a good crop, Lerner said.
Elsewhere, this winter has seen great growing conditions in South America, North Africa and India. Those are competitors to us, so that’s not great news. Don’t believe stories about troubles in Brazil and Argentina, he said about recent reports of harvest problems. “All you need to know is that everything’s wonderful (there).”
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Are you guessing that fertilizer prices might drop going into spring?
That’s a gamble that fertilizer industry analyst David Asbridge of NPK Fertilizer Advisory Services wouldn’t join you in.
He told attendees at the Canadian Wheat Board’s GrainWorld conference in Winnipeg that he expects U.S. prices to move moderately higher moving into spring, so long as bad weather doesn’t stop farmers applying fertilizer. Canadian price pressure might be better from a farmer’s standpoint: dealers up here haven’t run their inventories low like American dealers have. But they as well aren’t flush with mountains and oceans of fertilizer that they’ll need to bust out cheap to get rid of. He thinks there it is likely that Canadian fertilizer prices will rise too as spring approaches.
His longer term outlook is that after the huge surge and swoon of markets in the past three years – since 2007 – we’ll fall back into trendline growth, which is a gradual increase in prices keeping track with demand and inflation, something he thinks farmers will be easily able to afford if grain prices have reached a new, higher plateau level – which he believes they have.
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What’s today’s outlook for the 2010-11 spring wheat crop?
The best view today is provided by the hard red spring wheat contract on the Minneapolis Grain Exchange. Here’s a chart:
December 2010 Spring Wheat futures contract on MGEX
I don’t know about you, but I find that pretty disappointing. Monday we’ll get a much more Canadian prairie-based, longer term outlook for the totality of the 2019-11 spring wheat crop in the Canadian Wheat Board’s first Pool Return Outlook of the 2010-11 year. It’ll be released during the CWB’s GrainWorld conference, which is held every year at this time. It’s the first best-guess of the board about what farmers, eventually, will get for the crop grown this summer.
The construction of the PRO is always a bit of a mystery to those outside of the CWB. It combines a lot of factors that don’t easily make for a simple price discovery like those on an MGEX contract, which are for a specific grade at a specific time in a specific place. The PRO has to throw in existing commercial sales for the 2010-11 year, expected sales, expected world quality production assumptions, expected prairie quality and quantity production assumptions, and demand expectations. The board is always pretty cagey about the sales side of its business, which makes sense, considering it lives in a cutthroat commercial environment. No grain traders anywhere reveal much about how much they sell, to whom, for how much.
Its guesses about world wheat production and quality, and prairie wheat production and quality, have to be based on a lot of big assumptions, which is why projections often change so much around harvest-time and in the weeks afterwards, as assessments of the quality of the crop that actually came in across the northern hemisphere are tweaked. Remember late-summer, early-fall’s flurry of revisions from everyone – including the board – about protein levels in wheat in North America?
But the assumptions I’m interested in hearing about Monday are those for demand. For the sake of calculations, some demand numbers have to be plugged in to the infernal economic machine they have to use. But demand is hardly a set thing. The board’s got to come up with a single number for its PRO prices, so it must have to set down some hard number for demand expectations, and that’s an area fraught with difficulties these days.
Does the board believe the world economy is in “recovery” and likely to see stable or growing demand? Does it believe the risk of a double-dip recession is substantial or unlikely? This affects how much the world’s eaters are likely to demand our wheat.
Here’s how they’ve been promoting this year’s GrainWorld:
“GrainWorld’s 20th Anniversary To Focus on Economic Recovery”
That was the headline on the press release about the event, and it sounds to me pretty much like they’re recovery-believers. And the lede seems to generally back up that feeling:
“North American industry experts will delve into the question of economic recovery at GrainWorld 2010. Through a series of sector outlooks and analysis, experts will discuss what global economic recovery will mean for agriculture and commodity prices.”
However, the brief intro to the agenda in the CWB’s newsroom shows a much more nuanced pondering of the question of recovery: “Economic Recovery: Green Shoots or Summer Fallow?” That’s the headline, and the one paragraph following follows along in that vein: “The global economic recovery will be the focus of GrainWorld 2010. Has the recession ended and is the recovery taking root in the agricultural sector? GrainWorld 2010 will discuss the economy and how it is affecting farmers and the grain trade, both in Canada and around the world.”
That doesn’t sound to me to be as blindly believing in recovery.
Many analysts from many different companies and organizations will give their views on these questions and I’m not trying here to guess the details of their views. What I’m interested in is what sort of economic and demand assumptions are being made among the CWB’s price forecasters. A recovery implies stable or increasing overall world demand for grains and oilseeds. A double-dip recession implies likely weaker demand. Those have got to affect the price outlook for wheat.
So which assumptions of economic direction and worldwide demand are they making? That’s what I’ll be asking them Monday.
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Guessing currency directions makes most people look like fools.
Some people – analysts – have currency forecasting as part of their job descriptions. I imagine they hate that part of their jobs.
There’s one happy factor in the world of currency forecasting: trends go on for a long time when they get going. A famous currency exchange rate analyst I was listening to last week noted that fact, plus the reality that most currency surges go on far past when one would imagine they would end based on fundamentals. That’s helpful for those analysts who are like my pet miniature Schnauzer Asta.
Asta always wants to be in the lead on dog walks or at the dog park. And he’s very successful. Here’s the Asta Key To Leadership: Figure out which way everyone’s going to go anyway, and rush to get out in front. He’s brilliant at it: if he takes the wrong fork in the road in the forest, and the rest of us take the other one, he will whip around and come rocketing around the corner and barrel over our other dog, Wiggie, and blast through our legs or whatever else is in the way and get back out in front, ahead of everyone. Then, looking confident, he can once more show all the other dog walkers that he is the one leading, and we’re all following. The key to this sort of leadership is quickly recognizing when you’ve taken the wrong fork in the road, and then to rush out front, and then show absolutely no shame or sign of the fact that you were dead wrong a few seconds ago.
This leadership role was well-played by a big bank economist I heard on the radio a couple of months ago explaining why the Loonie would very soon be at 1-to-1 parity with the U.S. dollar. A month or so ago the same radio program had this big bank economist back on to explain why he now felt the Canadian dollar would slump in relative value and the Greenback would surge for an extended period. He didn’t sound chastened or contrite. Just confident about his new 180-degree turn of analysis. That qualifies him for the Asta, the award I’m going to start giving out for shameless reversals of opinion by wrongheaded prognosticators.
So how do you figure out a likely currency’s direction? You can rely on the fundamentals, but – as with the trend noted above – currencies often ignore the supposed fundamentals and go on trending. Or reverse course just when your primitive fundamental analysis told you that it would go on and on and on anon. And what are the fundamentals? That’s a tough one, because all currency interrelationships are precisely that: inter-relationships between different currencies. So, sure, right now the U.S. economy is still in the toilet and the U.S. fiscal situation is getting scarier by the day and there are all sorts of reasons to bail out of the Greenback. But into what? The Euro? How are the fundamentals there? Greece stumbling into the poorhouse, Italy, Portugal, Spain and maybe even my beloved U.K. perhaps following soon, the restrictions of the Eurozone meaning member governments don’t have devaluation and fiscal flexibility: see any reasons there to favour that currency over the Greenback?
Yes, there are the baby currencies, like the Canadian dollar, the Australian dollar, etc. out there, but they’re too small for most investors to feel safe with. The Chinese currency is not a direct option. The Japanese Yen is just kind of weird. Altogether it’s hard to come up with a simple strong-versus-weak scoresheet for the world’s major currencies these days.
Some of the hog industry’s haters have been running around in the past year saying that hog farmers should have seen their problems coming because they built the industry on a “low Canadian dollar.” Really? Were they saying this when the dollar was at 65 cents, or were they saying that it was going a lot lower? Remember all that “northern Peso” talk among prognosticators a few years ago? Remember the projections for a 50 cent dollar? Remember a certain big bank economist urging Canada to ditch the Loonie and embrace the Greenback before the Loonie dragged Canada into the gutter? I do. I didn’t hear too many calling for a massive revaluation of the Loonie like we’ve seen.
Was the hog industry built on a low dollar? At the time most would have said the dollar was overpriced, if anything. Farmers who made decisions based on what the most quoted analysts were saying were being pretty conservative, if anything. All the present talk about the hog industry being built on a low Canadian dollar assumes that there’s some sort of eternal rule by why the Loonie will over the long run average about one-to-one versus the American dollar. No one who knows anything about currencies believes this, but this type of talk isn’t being made by people who know anything about currencies.
What’s the most likely accurate way to gauge the trends and reversals of currencies? The best analysis I’ve heard always comes from technical analysts. They’re the ones who have the humility to accept that they can’t outguess the markets on fundamentals – those are already built into prices – but who try to notice market price structures evolving that give hints of unrecognized fundamental changes. The analyst I referred near the start of this post uses the interrelationship of two moving averages to give signals of trend changes. Another analyst I heard speaking about this last week said he tends to favour a three moving averages approach. And there are 1009 other ways to do technical analysis.
A simple approach to currency forecasting is done by one major agricultural organization here in Winnipeg. It takes the currency projections of the five big banks of Canada and averages them. This may sound passive, but they’re smart enough to know that they aren’t likely to outguess the banks. (I don’t think the banks are much to rely on either, but . . . )
So where does that leave the farmer with foreign exchange exposure? 1) You can attempt to do your own fundamental analysis. (Good luck!!!! What do you know that the market doesn’t already know?) 2) You can attempt your own technical analysis, by whatever tools you like best. (Good luck!!!!! Are you more adept with using these tools than full-time pros? Do you really understand the complexities of technical analysis?) 3) You can hedge your exposure with a broker or by yourself. (There’s a cost but a lot of business revenue certainty from this.) 4) You can ride naked through the raging winds of the currency hurricane and hope that it all works out in the end. (A situation experienced by almost every farmer in the past decade.)
It’s hard to do long-term hedging of a capital investment assuming a certain level of currency exchange relationships (the hog barn situation), but it’s pretty easy to hedge sales of crops and livestock that will be made in U.S. dollars. If your margins are already tight, and you’ve seen in the past few months how far from accurate most currency outlooks tend to be these days, why wouldn’t you consider hedging? If you use options you aren’t locked into anything other than the premium, but at least you have some floor established. If I had to guess, I’d say the Greenback’s going up in the next few months. But I know enough to never trust my own forecasts. I’m almost never right. And that puts me in the company of most of the currency forecasters I’ve seen in the past year.