THE Canadian dollar is close to a 30-year high at more than 92 cents US and some speculate that a further climb to par is possible.
The currency reflects a booming resource sector in Canada and economic weakness in the United States.
While a strong loonie might make a weekend shopping excursion to the U.S. a jolly affair, it hurts Canadian exporters, particularly farmers.
Most internationally traded agricultural commodities are priced in U.S. dollars and when the greenback weakens relative to the loonie, farmgate returns fall.
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A $5 US bushel of wheat is worth $5.88 Cdn when the loonie is worth 85 cents, but only $5.43 when the exchange rate is 92 cents.
When grain prices are strong, the hurt from a rising loonie is easier to bear but it can’t be dismissed.
Government can help farmers and other exporters adapt to the stronger currency by making regulatory changes and lowering taxes.
A report from agribusiness members of the Canadian Federation of Independent Business in March showed that 72 percent of those surveyed identified government regulation, paperwork and user fees as a priority concern and 67 identified the tax burden as a priority. These two were topped only by low farm income and rising input prices, but rated well ahead of issues such as safety net programs and marketing options.
When asked what government could do to help agricultural business, 80 percent put a priority on reducing red tape and 75 percent identified reduced taxes.
Governments are taking in lots of revenue because of the strong economy and high resource prices, but there has been no significant and widespread tax reduction for several years. Rather, they have succumbed to pressure to spend more.
The federal government raised program spending in the current budget by 5.6 percent, in Saskatchewan spending rose by nine percent, in Alberta by 17 percent and Manitoba by seven percent.
Some of that was needed to catch up to infrastructure needs, but new programs were introduced without much thought about offsetting this spending by reducing waste and reassessing existing, perhaps outdated programs.
Government can also slash red tape and streamline regulations that add to farmers’ costs and impede innovation without endangering health, safety and the environment.
The CFIB calculates that Canadian businesses pay $33 billion a year to comply with federal regulations.
One example of a way to streamline regulation is the often promised but never delivered harmonization of pesticide licensing and registration process in Canada and the United States.
Regulatory reduction is possible.
Canadian farmers have the skills to compete even with a strong currency so long as their tax and regulatory environment is globally competitive.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
