Sep 17, 2015
The Loonie flies to the rescue for Canadian farmers
The Royal Canadian Geographical Society has launched an effort to find an official national bird for Canada in time for our country's sesquicentennial celebrations in 2017. In voting so far, the Loon is outpacing the Canada Goose by a large margin. And no wonder - Canadian farmers are no doubt voting early and often for the Loon to thank it for helping to protect their profits against world market prices (as illustrated by the following charts).
In the last 18 months, the spot price of corn has fallen 24% in US dollar terms but only 8% in Canadian dollars. Price swings of this magniture are considered pretty typical even in good markets.
Similarily, wheat prices are off 26% in US dollars but just 11% in Canadian dollar terms. Canadian soy growers are stuggling with a 28% decline in price - a difficulty for sure - but nothing compared to US farmers who have seen a 40% price decline in their own currency.
Canadian canola producers, on the other hand are in great shape. Canadian dollar denominated prices have actually increased 23% in the last 18 months whereas they have remained essentially flat at +2% in US dollar terms.
But what the loon givith the loon also taketh away. The prices of many farm inputs and machinery - many of which are produced in the US - have risen for Canadian farmers. But farmers have some degree of control over machinery purchases and some inputs as well, whereas crop prices are totally out of a farmer's control. So the bottom line is that the profits of Canadian farmers in 2015 are likely to remain relatively stable, especially as compared to their US counterparts, many of whom are struggling in the current crop price environment.