Is the Canadian dollar worth 80 cents, 77 cents or 83 cents?
That depends on which day of the past week you checked. Or part of the day, because the value of the loonie versus the U.S. dollar has plunged and leaped like a big, angry pike trying to get away from the hook. Today it looks like it’s worth 83 cents.
Some of that is probably due to the U.S. Fed’s interest rate cut to one percent, which makes the greenback weaker in the minds of investors. Some of that is due to the roaring gains in commodity prices which occurred yesterday. Canada, as everyone has been hearing for a couple of years now, is a commodity-based economy still, so when commodities go up, so it seems does our dollar.
Read Also
Agriculture needs to prepare for government spending cuts
As government makes necessary cuts to spending, what can be reduced or restructured in the budgets for agriculture?
For farmers this rebound of the dollar isn’t a good thing. The falling was. World prices are generally set in U.S. dollar terms, so a falling U.S. dollar tends to make prices go down in Canadian dollar terms. Many Canadian farmers sell things like pigs and cattle that are based on U.S. market prices, so when exchange rates swing around wildly the returns American farmers get don’t seem to change a lot, but prices translated back to the Canadian farm gate can change greatly. For the past few weeks Canadian hog farmers haven’t suffered the big price cuts American farmers have faced. A reversal in the currency exchange direction could undermine that good fortune. Canola has been held up higher than it should have been because of the falling Canadian dollar. If the dollar keeps going up, canola will probably be weaker than soybeans.
Various economists are making guesses – oops, I mean offering analysis – of where they think the dollar is going to go for the rest of this year and for next, but as a Bank of Montreal forecaster admitted today, “it is a tad challenging to forecast in the midst of this whirlwind.” (See the story at www.reportonbusiness.com)
I don’t envy them having to make those forecasts. I don’t even envy me, having to write stories about the currency situation for our newspaper in this crazy climate. When I wrote a story for this week’s paper, which went to press Monday, I was referring to the dollar being worth 78 cents. When it hits farmers’ coffee tables today and tomorrow, that number looks like it will be five cents wrong.
But who knows? With this kind of multi-market volatility, by Friday that number may be a lot closer to being right. Or a whole lot more wrong.
