The Saskatchewan Pork Development Board says fluctuations in the value of the Canadian dollar continue to influence returns to western Canadian pork producers.
Returns to Canadian pork producers have improved dramatically over the past few months but the strong value of the Canadian dollar has tempered that improvement.
Sask Pork industry and policy analyst Mark Ferguson notes hog prices and most feed type commodities are determined in U.S. dollars with hog prices adjusted by the exchange rate to arrive at a Canadian price.
Next to feed prices and the U.S. hog cash and futures markets the Canada U.S. exchange rate is one of the most watched factors that producers would look at on a day to day basis.
Since January the Canadian dollar has been relatively volatile ranging from about 92 cents up to par and has averaged about 96 and a half cents.
It moves a lot day to day and from month to month and it’s definitely a factor that producers have to keep on top of.
The pricing in the U.S. has been extraordinary but the high value Canadian dollar continues to limit the price we end up with in Canada.
For example the index 100 hog price this week is around 155 dollars per 100 kilograms.
If the dollar was at 90 cents our price would be edging up to 170 dollars per 100 kilograms and if we had an 80 cent dollar we would be up at 190 dollars per 100 kilograms so it has a big impact on hog prices.
Ferguson says producers can hedge the exchange rate but its difficult to predict the value of the Canadian dollar next month, next year or over the next five years.
He says the swings do provide opportunities but the challenge is deciding the right value to lock in at.
Source: Farmscape.Ca
