Higher Canadian Dollar May Decrease Canadian Exports!
OMAFRA Business Finance Program Lead, Jennifer Stevenson, outlined several reasons the rosy outlook for the Canadian Dollar may cause financial problems for Ontario farmers. According to Stevenson, if US and Canadian dollars appreciate relative to other currencies, it could make our grains and oilseeds more expensive. So what are farmers to do?
OMAFRA Marketview
Global markets are trading higher this morning as US jobless claims numbers (27,000 fewer Americans filing for unemployment last week rather than an expected increase of 14,000).
The Canadian dollar is trading higher at 1.017, on speculation that North American economies will outpace all other western nations.
Crops:
There are rumours that China is on a buying spree, according to Bloomberg Financial. The USDA daily export report shows that “unknown nations” – widely acknowledged as being code for China - purchased 204,000 tonnes of new crop soybeans and 130,000 tonnes of new crop corn late yesterday.
This may help provide upward momentum to new crop grains and oilseed futures prices, which saw a downturn yesterday because of rumoured increased margin requirements by the Chicago Board of Trade as well as speculative money leaving the commodity sector as the US federal Reserve’s most recent round of quantitative easing is due to expire next month.
Wheat prices are trading higher this morning. Despite potential for the best yields in nine years, potential drought conditions in the US wheat growing areas persist, according to Reuters.
Livestock:
Reuters is reporting that hog prices fell to contract lows yesterday on sluggish demand before May 28 - US Memorial day (when demand is typically high). Also being cited for lower prices in the beef and hog sector are lower grain prices yesterday, as it was viewed as a lowering of feed cost.
Bottom Line for Ontario Farmers:
Given the overall economic climate of North America vs the rest of the world’s grain and oilseed nations in the western world, the risk is that the US and Canadian dollars will appreciate relative to other currencies, making our grains and oilseeds more expensive. Producers may consider starting to lock in prices opportunistically sooner, rather than later.Disclaimer: This commentary is provided for information only and is not intended as advice.
Jennifer Stevenson
Business Finance Program Lead
Ontario Ministry of Agriculture, Food & Rural Affairs
519-826-4350
jennifer.stevenson@ontario.ca
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