While global economic activity remains on hold in the wake of the COVID-19 pandemic, the soft commodities market faces continued uncertainty. As a mirror of the economy, the dollar has a direct impact on commodities.

One of the greatest challenges has been the depression in commodities prices while food is rationed at the local grocery store level. As restaurants and hotels have closed their kitchens, Canadians are simultaneously stockpiling their pantries with flour and other raw products. This has led to a recent spike in wheat demand and a depression in cattle and hog prices – among others.

The long-term economic impacts of COVID-19 on commodities will largely depend on how long economic activity is depressed, how severe it is at its lowest point and how individual markets respond in the coming weeks and months.

There are more questions than answers. When the market opens up again, will spending resume to pre-COVID-19 levels? Will Canadians return to restaurants and miscellaneous food spending? Of course, the depression in economic activity and stimulus/bailout programs will have an effect on the Canadian dollar as well.

Practical Steps for Uncertain Times

During this time, Canadian farmers and agribusinesses alike are looking for ways to pivot. Some are planting more in-demand crops like wheat and legumes, while others are looking to form new relationships and contract with businesses responding directly to the demand, including online retailers and supermarket chains. Farms and agribusinesses should both plan ahead when possible and contemplate insurance coverage considerations to weather the current COVID-19 storm.

  1. Be aware of your balance sheet and plan ahead when you can. Balance sheets will continue to be tight for some time. Maintain a conservative and prudent outlook on spending and plan for known costs. Make sure employees abide by safety rules to avoid workers’ compensation claims and, when possible, schedule out supply and other necessary purchases.
  2. Tie equipment schedules and stored inventory to current market value. While we can’t lower the cost of insurance itself, it is possible to watch equipment schedules and stored inventory value fluctuations and ask for price adjustments accordingly. Like vehicles, equipment depreciates annually and should be insured for its actual cash value. Similarly, if commodities are worth less than when you harvested them, let the carrier know so you don’t over insure them either.
  3. Create a narrative detailing your thorough risk management. If you’re a good risk, let your underwriter know. Write a narrative detailing your thorough safety and risk management practices across the farm or agribusiness. When carriers understand the extent of your existing internal safeguards, there is a potential for premium savings.
  4. Evaluate current coverage for other potential savings. There may be additional ways to save on insurance premiums right now. Discuss new and current operations, employee counts and workflow with your broker as he/she may be able to find additional avenues for savings. If things have changed, there’s a good chance your coverage can be re-adjusted as well.

Contact HUB Risk Services to learn how to develop a business continuity plan that will help protect your business and employees from the unexpected. Get the latest information, guidance and resources on Coronavirus (COVID-19) to help you protect what matters most on our Coronavirus Resource Centre.