October 23, 2008: 3:15 p.m.
The Canadian dollar has fallen beneath 80 cents US in the past couple of days. About a year ago it was hitting $1.10.
Hallelujah!!!!!
Without that major slump, prairie farmers would be making a lot less money. I was just talking to a hog marketing manager and he estimated that the drop of the dollar is giving Canadian farmers $20 per pig more than they would be receiving if the loonie hadn’t fallen.Â
That big pork price plunge on the American market? Not happening up here.
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Crop insurance’s ability to help producers has its limitations
Farmers enrolled in crop insurance can do just as well financially when they have a horrible crop or no crop at all, compared to when they have a below average crop
Yet.
But what happens if the dollar turns around? What happens if it goes back up to buck-for-buck parity? How about $1.10? Or $1.30? What would that do to producer returns?
Sure, lots of analysts will give reasons why that won’t happen. One I read today said 80 cents sounds about right for now.
But here’s a comment I saw in the British daily The Telegraph (telegraph.co.uk) about where exchange rates are likely to grow in today’s wild market:
“Nobody has any idea. No one ever gets it right and no one thinks that they can get it right.” That comment comes from Charles Goodhart, professor emeritus of banking and finance at the London School of Economics and a former member of Britain’s monetary policy committee.
Farmers might want to talk to their marketing advisors about whether or not they should be doing something about their currency exposure. Farmers might not be feeling fortunate today with flat pork prices and slumping crop prices, but hidden within them is a silver lining that could turn to tin.
