Higher Interest Rates, Stronger Dollar Weaken Pork Industry Profits

CANADA - The Director of Risk Management with [email protected] Marketing Services says indications of rising interest rates in Canada and the impact that's having on the value of the Canadian dollar is taking a bite out of the profits for Canadian pork producers, Bruce Cochrane reports.
calendar icon 20 July 2017
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On 12 July, for the first time since September 2010, the Bank of Canada increased its overnight target rate by 25 basis points, increasing its lending rate by one quarter of a per cent.

Tyler Fulton, the Director of Risk Management with [email protected] Marketing Services, says the focus of Canadian pork producers right now is largely the effect that interest rate changes have had on the Canadian dollar.

Tyler [email protected] Marketing Services

We've effectively seen a six cent run up in the Canadian dollar over the last month and that is no doubt a negative occurrence.

With each one cent move in the Canadian dollar you can expect generally about a two dollar per 100 kilogram price decline in Canadian hog prices so this recent rally has resulted in roughly a 12 dollar decline in Canadian hog prices.

Thankfully North American hog prices or US prices are strong enough so that it hasn't shifted us from profitable to unprofitable but it no doubt has taken a bit out of the margins for Canadian hog producers and it does call into question whether or not the market could continue to appreciate.

It seems as though it's definitely at the high end of the recent range but it calls into question whether or not we can expect further gains which is another solid reason for producers to be hedging a good portion of their winter production.

Mr Fulton says producers are largely well positioned for the next eight months having priced a large portion of their production when it was evident that prices were profitable and that hog numbers were going to be large.

He says that is likely to serve them well.

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