By Tom Collins
The lower Canadian dollar is a good thing for Ontario farmers, says the chief agricultural economist with Farm Credit Canada, who watched the dollar drop to just under US $0.70 in January.
The low dollar means “all profits” for farmers in agriculture sectors, said J.P. Gervais. But “a lower dollar is not going to increase productivity, and it’s not going to make us more competitive long-term.”
The loonie briefly fell to US $69.90 on Jan. 12, the first time it dropped below US $0.70 since May 2003. Macquarie Group Ltd.’s David Doyle — the top-ranked forecaster for the U.S. versus Canadian dollar exchange rate — told the National Post the dollar could drop to US $0.59 cents by the end of 2016.
Gervais doesn’t see that happening. While the dollar might sink to US $0.67 cents, Gervais expects it to be higher than $0.70 cents by year’s end.
“I’ve got no problem seeing the dollar drop,” said Grain Farmers of Ontario (GFO) Middlesex County director Joe Thomson said, although noting it makes farm equipment more expensive. “We had some good years and a lot of us are pretty current in our equipment. We can weather the storm for a while. We can just quit buying equipment.”
Lambton County GFO director Dave Park believes farmers would put off spending capital if the dollar continues to slide, but added the lower dollar adds a new dynamic to grain marketing. “We need to be shrewd marketers to try and take advantage of it,” he said.
Beef farmers are also pleased with the low dollar. Shawn Morris of the Essex County Cattlemen’s Association said the low dollar raises beef prices. “(The low dollar) ends up as a bonus for Canadian cattle producers,” he said.
Francis Weitzel, president of Perth County Beef Farmers, said whether farmers make more money depends on management. Those who manage their farm well will profit more.
“It should help our sales to the Americans,” Weitzel said. “Beef farmers should be reasonably happy.”
Ontario Fruits and Vegetables Growers Association board chair Jason Verkaik said while the lower dollar will raise input costs, it will also make U.S. imports more expensive.
“You just hope sales are higher” than increasing input costs, he said. “If the dollar is going to be like this for the foreseeable future, for the people who are involved in export, there’s definitely some strong upside.”
Ontario agricultural economist and crop farmer Phillip Shaw said it comes down to choices for farmers.
“I think it’s a good thing for Canadian agriculture as a whole,” he said. “You have choices to make. It’s probably not the greatest choice to buy a brand new tractor today. I bought one two years ago when the dollar was very close to par, and that worked out for me. That doesn’t mean I’m smart. That just means I’m lucky. If you price any equipment now, it’s going to be 30 per cent more than it was three years ago. This is not rocket science.”
Let the dollar drop
By Tom Collins