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Weak Canadian Dollar Factors in Canadian Hog Producers' Margins

19 January 2017, at 6:00am

CANADA - The Chief Agricultural Economist with Farm Credit Canada says the weak Canadian dollar and continuing strong exports markets helped Canadian pork producers outperform their US counterparts in 2016, writes Bruce Cochrane.

Farm Credit Canada expects the low Canadian dollar to be the primary driver for profitability for Canadian agriculture in 2017.

J.P. Gervais, Farm Credit Canada's Chief Agricultural Economist, says while 2016 was a little disappointing for Canadian hog producers the situation was better in Canada than in the US.

J.P. Gervais-Farm Credit Canada:

Some of the downturn that we've seen in the market over the course of the last six months of 2016 were entirely driven by the situation in the United States.

The hog price in the US fell because of capacity constraints in the US and that had a direct impact on the price that producers got on this side of the border.

But, at the end of the day, if you look at margins which were negative for hog producers in Canada over the last six months of 2016 but if you compare these margins to what margins were in the United States we've had better margins.

Again that's partly the result of a Canadian dollar that has been favorable for our producers in Canada compared to the US.

Strong demand in foreign markets as well has really helped sustain us going through that period of low prices and very tight margins.

The last six months of 2016 were really rough to get through but I would say that things could have been worse in some sense if we didn't have the Canadian dollar work in our favor.

Gervais expects that trend to continue in 2017 with the Canadian dollar forecast to average 75 cents US.

He expects we'll see a bit of weakness in the exchange rate or the value of the Canadian dollar early on in the year driven by the spread between interest rates in the United States and Canada.

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