Farmscape for April 24, 2018
An agricultural economist with Farm Credit Canada expects the lower value of the Canadian dollar compared to the U.S. dollar to continue to support profitability of Canadian pork producers through the remainder of 2018.
New free trade agreements, including the Comprehensive Economic and Trade Agreement with the European Union and the 11 nation Comprehensive Progressive Trans-Pacific \c Partnership will create new export opportunities for Canadian pork producers and processors.
Craig Klemmer, a Principle Agricultural Economist with Farm Credit Canada, says Canada is a top producer of agricultural products across the board and, while we do have some higher costs of production, the value of the Canadian dollar and interest rates will come into play.
Clip-Craig Klemmer-Farm Credit Canada:
Interest rates are key and something that we need to be monitoring.
We have seen three rate increases in Canada and that is increasing costs for agriculture and the hog sector.
When it comes to the value of the Canadian dollar and interest rates and the relationship it really is that spread between the expectation of future rate increases in the U.S. relative to future rate increases here in Canada.
So if the U.S. is looking to increase rates at a faster pace than here in Canada it generally means that we're expecting more growth there and thee for it creates an inverse relation on the value of the Canadian dollar and vice versa.
Right now we're seeing a little bit of that interest rate spread coming into the Canada U.S. dollar component so it's creating some downward pressure on the Canadian dollar.
Right now we're forecasting that Canadian dollar to stay below that 80 cent mark so, as the U.,S. is expected to increase rates a little faster than Canada, it puts a little bit of downward pressure on the value of the dollar.
Klemmer says we've got new trade agreements that are creating opportunities, we have a Canadian dollar that helps support profitability, farm cash receipts have been growing and our net income is expected to be strong in Canada, all factors to support optimism.
For Farmscape.Ca, I'm Bruce Cochrane.
*Farmscape is a presentation of Sask Pork and Manitoba Pork