WINNIPEG (CNS) – The recent climb of the Canadian dollar is creating some headaches for exporters in Canada, but the bulk of the jump is over, according to a market analyst.
“We’re working with an assumption of 80 cents for the rest of 2018,” said J.P. Gervais, chief agricultural analyst for Farm Credit Canada.
On March 19, the Canadian dollar was worth 76.32 U.S. cents but by the morning of April 18 that had jumped to 79.14 U.S. cents.
He says the recent rally in the value of the loonie was largely created by a rise in crude oil prices. However, he says that rise has largely topped out due to all the oil sitting in the United States and speculation that the Organization of the Petroleum Exporting Countries (OPEC) will keep its production cuts in place.
Read Also
New Quebec ag minister named in shuffle
Farmers in Quebec get a new representative at the provincial cabinet table as Premier Francois Legault names Donald Martel the new minister of agriculture, replacing Andre Lamontagne.
As for what that means for farmers, Gervais says most crop decisions were based this year on a 78 to 80 US cent dollar, so there likely won’t be a need to reverse major planting decisions.
“Eighty-five cents is the point where you would have to think twice about the marketing plan and I don’t think we’re heading in that direction,” he said.
As a result, he says the country will likely see record canola acres while the soybean expansion will take a breather this year.
“We will still get a lot of soybeans on the Prairies. Manitoba will get a lot and some will push into Saskatchewan,” he said.
Looking ahead, Gervais says the loonie could face some pressure in the coming months due to looming tax changes in the U.S.
He says the lowering of the corporate tax will generate job growth in the U.S. even while wages are on the increase.
Turmoil in Syria and the trade relationship between China and the U.S. will also be factors worth watching when it comes to the value of the dollar.
One issue that appears to have settled down though is the ongoing saga of the North American Free Trade Agreement and its daily effects on the loonie.
However, Gervais says it is an issue worth watching as it will still have an effect on the exchange rate.
“Whenever there was uncertainty (with NAFTA) the U.S. dollar tended to gain in value,” said Gervais. “Trade relations, not just NAFTA, but overall with the U.S. are something to watch.”
