Canada’s dollar has declined by as much as three percent recently as investors price a COVID-driven global recession into the stock and commodity markets. So far this year, the Canadian dollar has averaged at a value of just over 75 U.S. cents. For much of 2020, any Canadian dollar gains have been hindered by oil prices, domestic economic issues including rail and shipping disruptions, and a soaring federal budget shortfall from COVID-related losses and program costs.
All that said, Canada’s overall economy continues to be export-driven. And as such, a weaker Canadian dollar relative to the U.S. greenback is viewed, especially by the agricultural sector, as a good thing.
Jean-Marc Reust is vice-president of corporate affairs at Richardson’s International, which is based in Winnipeg. Reust explains that a cheaper Canadian dollar is always a double-edged sword. A Canadian dollar valued at 15-to-25 percent lower than the benchmark U.S. greenback can make farm and crop inputs more expensive for Canadian farmers – but it also makes the price of Canadian commodities very attractive for international buyers.
“A weaker Canadian dollar makes exports more attractive on the international front. We’re able to price competitively against competitors. And so that translates into some pretty good pricing for farmers for their commodities. We’ve all seen a drop in fuel prices, so that is an advantage in the equation. But the flipside of that equation, though, is that many of their inputs, seed, chemicals, fertilizers, where those products originate from outside Canada and are priced, therefore, in U.S. dollars, those have become considerably more expensive.”
After a rough start to the year that saw strikes and protester blockades which nearly paralyzed much of Canada’s rail and shipping transportation networks, Reust says Canada’s agribusiness industry has returned to some semblance of normal. And he believes the Canadian commodity export picture is fairly bullish in light of some recent overseas announcements.
“Countries that usually compete with Canada to supply grains and oilseeds to an international marketplace are restraining their exports. So, Russia, the eastern European countries, have either stated or have suggested that they will be restricting exports and maintaining their production for domestic consumption. And Canada hasn’t done that. We’ve become looked upon as being a source for grains and oilseeds at the source of food and food production.”