Higher Dollar Lowers Ontario Hog Prices

ONTARIO - On May 16, 2003 the Canadian dollar topped 73¢ US, an increase of nearly 10¢ US from the beginning of the year, or a 15% gain in less than five months. The impact on hog producers has been dramatic.

5 June 2003

2 minute read

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Each 1% the Canadian dollar gains serves to lower Ontario hog prices by a corresponding amount.

By the second week of May, hog prices had begun to approach the $150/ckg level, but add 15% to that value and you can calculate that hogs would be trading in the low $170/ckg range if the exchange rate were still at its levels from early January.

Producers may notice some relief in the form of lower feed costs caused by lower Ontario grain basis levels, but with loan payments, utilities and labour expenses all coming in Canadian dollars, there's no doubt the rising dollar squeezes producer profit margins.

Processors also feel the pinch from a stronger Canadian dollar, even though their cost of buying hogs is reduced.

Pork that is exported is generally paid for in US dollars, which are converted into fewer Canadian dollars at a higher exchange rate.

Processors then have to pay financing costs and labour costs in Canadian dollars.

In effect processors have seen their non - hog related costs increase 15% relative to their competitors in the US at a time when packer margins are already seasonally tight.