Lower Dollar Improves Canadian Export Outlook

CANADA - Informa Economics says the dramatic slide in the value of the Canadian dollar will help improve the competitiveness of Canadian agricultural exports into key markets, most notably the United States, Japan and China, writes Bruce Cochrane.
calendar icon 28 October 2008
clock icon 3 minute read

Over the past two weeks the Canadian dollar has fallen significantly, dropping below 80 cents US.

Informa Economics vice president Dave Reimann says, while October has not been kind to the Canadian dollar, there are benefits.

Dave Reimann - Informa Economics

Some of the key areas, of course, where the dollar has lost considerable ground against is the US dollar as an example and so that does improve our prospects for moving commodities into the United States.

At the same time, for growers in Canada, it will limit imports of US corn or corn DDGS into Canada because it makes those commodities much more expensive and it's going to force more feed demand for instance into Canadian products like feed barley or feed wheat.

Other areas where there's been some benefits, the Japanese yen has actually been gaining huge ground against the Canadian dollar in the last little while so again, for some of our meat products barley, wheat and canola, they're steady buyers.

They are somewhat inelastic but it does at least give us some hopes for seeing additional businesses into Japan.

Another country that could come into play, especially in something like canola, is China because China's currency is somewhat tied to the US dollar and quite interesting through the last month, while the US dollar was screaming to these new highs, the yuan in China has not really changed in value to the US dollar so in other words their purchasing power has gone up.

And we're quite hopeful actually this might lead to some additional canola sales, as an example, that we might not otherwise have seen.

Mr Reimann suggests much of the previous rally was fueled by unreasonable speculation so the recent sell-off of agricultural commodities will allow markets to return to a level where we discover true demand and get back on a more measured growth curve.

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