The rapid rise of the Canadian dollar could have more impact on the cattle industry in the long term than BSE, says an Alberta-based packer.
Brian Nilsson, co-chief executive officer of XL Foods, told a Canadian Western Agribition audience Nov. 22 that the increasing dollar had already cost 33 cents a pound on a finished steer, or $400 a head.
“Ten to 15 years from now … our dollar could be par,” he said. “That’s going to mean a huge amount of things to producers.”
Nilsson said the exchange rate is a factor whether the border opens or not.
Read Also
First annual Ag in Motion Junior Cattle Show kicks off with a bang
Ag in Motion 2025 had its first annual junior cattle show on July 15. The show hosted more than 20…
“When we come out on the other side (the border opens to live cattle), we’re going to have to understand that that change in itself is pretty dramatic,” he told reporters after his presentation. “The prices aren’t going to be as good as we hoped; they’re going to be better than where we were.”
Nilsson said if the U.S. fed price is $85 per hundredweight when the border opens and the Canadian dollar is at 83 cents, the basis will be $12 and the Alberta fed price will be $90.
“It’s going to be 90 cents a lb., not $1.10,” he said. “Nobody has been saying enough about the effect (of the exchange rate).”
He also showed statistics that indicated the average price over the last 10 years was 84 cents.
For packers and processors, the rising dollar affects labour costs and value-added competitiveness. Some processors could be in trouble as their margins shrink.
Nilsson said the Canadian industry has come through BSE a confident, stronger industry and prices will improve whether the border opens or not.
XL has added a second shift at its Moose Jaw slaughter plant to double its capacity to about 4,000 head per week, or an extra 200,000 cattle each year.
An open border could make that redundant, Nilsson said, but he also said the increases at other Canadian plants mean capacity is up more than one million head.
“That is why I strongly believe that the bulk of the crisis is behind us and we’re moving forward.”
Nilsson added that Canada can’t ship all its beef in a box to the United States until there is grade equivalency.
“The same fundamentals are in place when the border opens as it was before, and that is that the price we get for meat when we sell it into the United States is not the same price that they get for that because they can grade it with USDA Choice grade and we can’t,” he said. “That disadvantage is about $50 a head, which is about the same as the freight, so it tells you that’s part of the reason the industry has had to fight this battle all the time.”
