The loonie and Canada’s ag exports: what really matters?

With a Canadian dollar hovering close to USD$0.80, a U.S. rate hike unlikely until at least fall and a rally in oil prices, it’s a good time to revisit the question of the loonie’s impact on Canada’s ag exports.

Conventional wisdom suggests a falling loonie will act to boost Canadian exports, as it’s likely to make them more competitive in foreign markets. But it’s not as simple as that.

There are a number of reasons it’s not a straightforward relationship. For one thing, a higher Canadian dollar usually indicates strong commodity prices. And prices support profitability.

As well, a lower loonie can often increase the costs of production, with higher input and equipment  costs.

FCC Ag Economics: A 2015 Look at Global Trade makes the point further.

There’s very little benefit to relying on the exchange rate to produce long-term success. Instead, ensuring your operation is focused on establishing long-term relationships in the right markets, innovation and productivity will drive future success.