Rising Dollar Lowers Profitability in Swine Production

CANADA - The Saskatchewan Pork Development Board reports the rising value of the Canadian dollar continues to erode the profitability of western Canadian swine producers, Bruce Cochrane.
calendar icon 8 November 2007
clock icon 3 minute read

As the value of the Canadian dollar continues to rise, fueled by weakness in the U.S. dollar, some analysts are predicting it could reach 1.12 U.S. over the next few months.

Sask Pork policy analyst Mark Ferguson says the majority of pork producers can do an effective job on the pork production side of the business but to have a factor that's beyond their control impacting profitability, such as the Canadian dollar, has got to be disheartening.

Mark Ferguson-Saskatchewan Pork Development Board

For the hog industry the Canada-U.S. exchange rate is a very significant adjustment that occurs every day and it's applied to the U.S. pricing formulas to arrive at a local price.

Over the past month the dollar has risen from around par to a situation where the Canadian dollar is actually worth more than the U.S. dollar.

Today one Canadian dollar is worth about a dollar and seven cents U.S.

In terms hog prices, it represents another seven dollars less that producers are going to have to cover their costs per hog and this is happening at a time when production costs are at their highest levels in recent history.

So it's not a very good thing at all for hog producers.

In terms of what segments are affected the most, probably the market hog sales would be affected the most.

All animal sales would be subject to the exchange rate but since a market hog is worth a lot more in dollar value than a weanling export, the market hog on a per animal basis is affected more by the exchange rate.

Ferguson notes, while the rising value of the Canadian dollar will reduce slightly the cost of feed ingredients and other inputs that are imported from the U.S., this advantage is pretty minour when compared with the massive impact the dollar has had on hog prices.

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