Margins on Hog Production Expected to Tighten as Canadian Dollar Rises

CANADA - Saskatchewan Agriculture and Food predicts tighter margins in western Canada's pork industry as the value of the Canadian dollar continues to soar.
calendar icon 14 June 2007
clock icon 3 minute read
Over the past two weeks the value of the Canadian dollar has reached 30 year highs hovering around the 94 cent U.S. mark. Saskatchewan Agriculture and Food livestock economist Brad Marceniuk observes, overall, U.S. hog prices have seen little change over the last month or two but, because of the strength of the Canadian dollar versus the U.S. dollar, we've seen a drop in Canadian prices relative to U.S. prices.

Brad Marceniuk-Saskatchewan Agriculture and Food

The Canadian dollar has increased significantly against the U.S. dollar since the beginning of April. Over the last two months the Canadian dollar has increased by about eight cents, which is over a nine percent increase.

We've seen some strong economic growth in Canada and increased inflation in Canada which has basically got the market thinking that the Bank of Canada will increase interest rates in July.

CIBC World Markets has even predicted that the Canadian dollar could hit parity with the U.S. dollar by then end of 2007.

With Canadian hog prices based from U.S. hog prices adjusted for the exchange rate a strengthening Canadian dollar has a direct negative effect on Canadian hog prices.

Without including any market changes today the direct loss in Canadian dollars in revenues over the last two months is estimated to be about 12 to 14 dollars per 100 kilograms which is equivalent to about 11 to 13 dollars per slaughter weight hog.

While some of the inputs that Canadian producers will look at will actually be reduced because of the stronger Canadian dollar, there won't be enough of a reduction to offset the loss in revenue that Canadian producers will not receive because of the strengthening Canadian dollar.

Marceniuk adds feed costs over the last month or two have been relatively stable.

He notes increased corn acreage numbers this spring have tamed prices to some extent however, he adds, year over year we've seen a large increase in feed prices in Canada and the U.S.
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