GATINEAU, Que. Ñ Canada’s agriculture and food industry should assume the Canadian dollar will appreciate another 10 percent or more against the American dollar and make their business plans accordingly, says a leading food processing executive.
Rick Young, president of Maple Leaf Consumer Foods Inc., said in a Feb. 3 interview it spells trouble.
“My view is plan for the high end, 90 cents,” he said after a speech to the Canadian Meat Council.
“It forces you to make some fast decisions and the consequences are potentially dire for Canadian value-added.”
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It could affect the competitiveness of Canadian products in the American market because those markets were often gained with the advantage of a dollar worth less than 70 cents U.S.
The 20 percent escalation in the past several years has squeezed margins and made those markets less lucrative.
“Those markets are at risk for us,” he said.
“There also is the risk of more imports coming into Canada, so it really is a double-edged sword for us.”
He said industry planners have to consider this currency balance as “the new normal” and write it into their business plans.
If it doesn’t happen, companies that have planned for the worst will then be in better shape than expected.
Cattle market analyst Kevin Grier from Guelph’s George Morris Centre, an industry analyst centre, said the low dollar was a boon to the cow-calf sector. “They made a lot of money from that low dollar. The appreciation has hit that sector particularly.”
That industry now has seen its margins cut.
In the hog industry, it is the packing industry that has been hit by the rising dollar, said Canada Pork International executive director Jacques Pomerleau. “It hasn’t really come back to producers with lower prices but the products they sell at American prices with Canadian costs suddenly are worth a lot less to their bottom line.”
Meanwhile, Young also warned that the food industry faces mounting pressure to be “accountable” for the products they sell.
In the United States, lawsuits have been filed over allegations that food products contained material that has been damaging to public health.
Young said it affects many industries. Pharmaceutical advertisements now take as much time listing disclaimers and potential side effects as they do trying to sell the merits of the product.
He predicted the same trend in the food industry, even though Canadians are not as prone to settle their differences in court.
“In a global economy, there are consumer advocates who don’t think we have individual responsibilities so the issue is making sure we understand the accountability requirements before they are forced on us.”
