IS A FALLING LOONIE GOOD FOR CANADIAN FARMERS
Friday, 13 February 2015 17:45
Reading an article in the Western Producer titled, “Why a Falling Loonie is Good for Farmers” got me thinking - is it really a good thing for farmers?
The article discusses the theory that the low exchange rate, at about .80 cents CA per 1 U.S dollar, is helpful for inciting demand and driving up prices for commodities. The argument being that commodities are now cheaper to people in the U.S. because they are priced in U.S dollars.
For example – a CA $100 purchase will only cost an American buyer US $80.
These benefits are apparent in the cattle industry. Outside of Canada, purchasers can now buy Canadian cattle products for less than they could at home. The declining loonie helps to decrease the cattle prices in the US due to exchange rates. However, Canadian feeders may have to bid higher for local calves to keep them out of American hands. So there are apparently both pros and cons that accompany the falling loonie in the cattle industry.
Because energy prices are low, even with a low loonie, expect fertilizer prices to be lower. This is something that all farmers will agree is a good thing. On the other hand, any farm machinery manufactured in the U.S. is likely to come with a much higher price, which could turn people away from new iron.
The article also states that Bank of Canada’s cut in the interest rate provoked the slide in the loonie. Farmers will probably not see any interest difference with their variable rate loans unless banks keep cutting the interest rate.
On the plus side the article closes by stating 3 to 5 year mortgage rates should improve. Which is a good thing for all Canadians.
What do you think? Is the falling loonie a good thing or a bad for Canadian farmers? See the Western Producer article here: HTTP://WWW.PRODUCER.COM/2015/01/WHY-A-FALLING-LOONIE-IS-GOOD-FOR-FARMERS/