Lower Canadian Dollar Beneficial to Canadian Ag

CANADA - The Saskatchewan Pork Development Board reports the falling value of the Canadian dollar helping the entire Canadian agriculture industry and in particular hog producers, writes Bruce Cochrane.
calendar icon 23 October 2008
clock icon 3 minute read

Over the past year the Canadian dollar has averaged roughly par with the U.S. dollar reaching as high as 1.10 U.S.

Most recently it has dipped to as low as under 80 cents driven down by the global financial crisis.

Sask Pork Policy Analyst Mark Ferguson says there's no question the decline will provide much needed relief for the entire agriculture industry but in particular the pork industry.

Mark Ferguson-Saskatchewan Pork Development Board

The exchange rate touches every Canadian producer every day primarily because hog prices are determined in the U.S. and adjusted on a daily basis by the exchange rate to arrive at a Canadian price.

At today's prices and a par dollar hog prices would be approximately 107 dollars a hog.

With today's 80 cent dollar that price becomes 133 dollars a hog.

So the change in currency has resulted in a price increase of 25 dollars per hog.

A lower Canadian dollar will over time result in higher feed costs which will partially offset the benefit of higher hog prices.

However, all things considered, producers obtain a benefit from the lower Canadian dollar.

We basically spent the entire past year working with a par exchange rate and that's been a struggle for producers because what seemingly was a competitive cost structure for our business was thrown out the window.

We're not the only industry breathing a sigh of relief over this.

If the dollar says at an 80 cent or 85 cent level it's going to do wonders for the meat packing industry and really any manufacturing business.

Ferguson notes Canadian processors also derive a benefit from the lower dollar in that the price for Canadian pork increases and that is the primary reason hog prices increase.

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