The sinking Canadian dollar is generally hailed as being good for exporters.
Although farmers are exporters, they also rely on some imports of machinery, fertilizer and fuel.
Those who recently ordered machinery parts from across the border are feeling the first sting in what some predict will be a swarm of higher prices for agricultural inputs.
Maurice Korol, a farm input economist with Agriculture Canada, said most farmers haven’t yet seen input prices increase due to the low loonie. In fact, surveys this summer comparing prices in Manitoba and Ontario to costs across the United States border showed the opposite effect.
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“Those (inputs) that are more expensive in Canada are less expensive than they were, say, a year ago,” said Korol.
But eventually, farmers will pay for the drop, said Karl Meilke, head of agricultural economics at the University of Guelph, Ont.
“In some cases, it (the effect of the dollar) will show up almost immediately, and in some cases, it will be delayed, but sooner or later, it’s going to raise our prices,” he said.
Prices of inputs made entirely in the United States will jump first, he said. But manufacturers who use price lists will wait until the dollar stops jumping around before making changes.
“They’re going to wait a while to see if the exchange rate variation is something they think is permanent, or whether it’s something they think is going to go away in a month or two.”
Before the Canadian dollar started dropping, it was worth 70 to 72 cents U.S. Last week, it spent some time around 65 cents. If exchange rates stabilize at 65 cents U.S., input prices may increase seven percent to reflect the drop, said Meilke.
Lorne Henry, a producer from Portage la Prairie, Man., doesn’t think the lower dollar is an overall benefit for farmers.
“Hopefully the dollar doesn’t stay down too long, because this (input prices) would be quite an increase to what we had before.”
Henry has noticed an immediate jump in the price of potato equipment parts, which usually come from the U.S., and are priced in U.S. dollars.
But dealers are well-stocked with most brands of parts and equipment bought before the dollar dropped, said Clark Tweed, vice-president of Canada West Equipment Dealers Association.
“As these inventories start to go down with sales, I would think anything new that’s going to be built is going to reflect the price increase.”
He thinks the price increase could be as high as 10 percent.
“It’s probably as good a time to buy as any time, and beat the increase,” said Tweed, who owns dealerships at Medora and Killarney, Man.
Equipment dealers are worried about how an increase will affect sales, which have already fallen because of low commodity prices.
“If the farmers aren’t spending, it kind of affects everybody,” Tweed said.
As long as farmers are making money, they should benefit slightly more from the exchange rate than they are hurt by increased input prices, Meilke said.
But he noted the weak dollar is less of a benefit than a cushion against a serious drop in export demand and plummeting prices for grain and livestock.
“We have a weak dollar because demand for our agricultural output in Asia is dropping like a rock,” he explained.
