2021 Trade Report: Using currency movements to monitor agriculture and food performance

  • Oct 26, 2021
  • 11.5 minutes


The Canadian dollar has gained 1.4% against the USD since the start of the year, the best performance among G10 currencies, helped by higher commodity prices. That usually bodes poorly for Canadian exports as currency values are an important determinant of Canada’s overall trade performance. It’s not the only determinant: geopolitical tensions, importers’ economic robustness, weather disruptions or other major disruptors to either supply or demand (e.g., China’s hog herd rebuilding) are also key. But given the major role they play, exchange rates should be measured as accurately as possible.

A simple look at the USD/CAD rate is often used as an indicator of Canadian competitiveness because, in part, most total Canadian exports, including several agriculture commodities and most food products, go to the U.S. But that fails to capture the influence of competing exporters’ currencies on importers’ decisions. We propose an effective exchange rate (EER) to assess the CAD relative to a basket of currencies from other large exporters to improve how we evaluate currency movements on our ag and food trade performance.

Agriculture’s trade landscape in 2020

COVID-19 produced a contraction in global ag exports1 in 2020, shrinking it 9%2 year-over-year (YoY). All HS codes shrunk except one, but the hardest hit were fish and crustaceans, which fell 25% and fruit and nuts, by 15.1%. The exception was oilseeds which grew 7.1% YoY. That was partly driven by growth in global canola exports, but primarily from an 11.4% gain in global soybean exports, which are roughly six times bigger than canola exports.

The pandemic tended to exacerbate the decline in the growth rate of global exports seen in 2019 for most commodities. That, and the decline in the 2015 overall trade values, have meant that 10-year annual average growth (AAG) trends for live animals, fish, live plants, and cereals are negligible. The category of vegetables has seen 1.5% AAG, fruits and nuts, 2.6%, and oilseeds, 2.7% since 2011.

It was, overall, a good year for Canadian ag exporters. We gained the most of all major exporters, with 13.9% YoY growth in total exports. China was the only country in the top five with a YoY shortfall. The U.S. continued as the world’s largest supplier of ag commodities, followed by the Netherlands, China and Brazil, each of whom has traded the second to fourth positions with each other over the last 10 years. With 5.5% of total agricultural exports in 2020, Canada was the world’s fifth-largest ag exporter, a position held since 2012. Since 2011, Brazil has made the most ground, growing their average annual ag exports 7%. Canada, with 2.3% AAG, outpaced both the Netherlands and the U.S.

As usual, our exporting success in 2020 came from cereals (28.0% of total Canadian ag exports) and oilseeds (32.2% of total Canadian ag exports). Of all cereals, wheat is our largest export. Over the last 10 years, Canada has maintained its top-tier positioning in wheat markets, moving among first, second and third positions. However, the big story in wheat has been the rise of the Black Sea region (Bulgaria, Georgia, Romania, Russia, Turkey, and Ukraine). In 2011, they accounted for 12.1% of total global wheat exports - in 2019, that grew to 30.5%.

1 Includes HS01 (Live animals), HS03 (Fish and crustaceans), HS06 (Live plants), HS07 (Edible vegetables), HS08 (Fruit and nuts), HS10 (Cereals), HS12 (Oilseeds)

2 Data used from UNComtrade extracted on 10/09/21.

Food’s trade landscape in 2020

Compared to ag’s overall contraction of 9%, total food exports3 weren’t as badly hit by COVID slowdowns, declining 3.7%. Nonetheless, growth in total food exports over the last 10 years has been sluggish, rising at less than 1% AAG. Meat is the largest category in food exports, accounting for 13.4% on average of total food exports between 2011 and 2020. It had 1.3% AAG, one of the highest growth rates across all sectors. Beverages, the second-largest category totalling 12.2%, recorded 1.1% AAG over the last 10 years.

Canadian meat exporters helped spur the growth of the meat sector. Together, pork and beef have comprised, on average, 36.4% of total global meat exports since 2011. In 2020, Canada was the world’s eighth-largest beef exporter, with 4.6% of total exports. Our ranking in beef markets has improved since 2011 with an impressive 7.8% AAG for fresh beef exports (and 8.3% AAG for the much smaller category of frozen beef exports).

A different pattern emerges for Canadian performance in pork markets. Canada was the fourth-largest exporter of pork in 2020 with 8.7% of total pork exports, having moved up from the fifth largest since 2011. But we’re growing our exports at the same rate as our competitors, and our market share hasn’t increased.

As of 2020, Canada has not yet cracked the Top 10 exporters of food products. But as the world’s eleventh-largest exporter, we’ve gained ground since 2011 when we were in 16th place. The U.S. has maintained its leading role since 2012, followed by Germany, the Netherlands, and France. Rounding out the Top 10 are Brazil, Italy, China, Belgium, Spain, and Indonesia.

3 Includes HS02 (Meat), HS04 (Dairy), HS09 (Coffee), HS11 (Products of milling), HS15 (Fats and oils), HS16 (Preparations of meat and fish), HS17 (Sugar and confectionery), HS18 (Cocoa), HS19 (Preparations of cereals, flours), HS20 (Preparations of vegetables, fruits, nuts), HS21 (Miscellaneous edible preparations), HS22 (Beverages), HS23 (Animal feed, residues, and waste), HS35 (Albuminoidal substances; modified starches; glues; enzymes)


The 2021 FCC Trade Report describes an effective exchange rate (EER) index for wheat, canola, beef and pork. Using average annual export (AAE) values from 2017 – 2019, we calculated market shares of Canada and competitors with at least 5% average market share for each commodity (Table 1). The four CAD indices are based on the currency values of each exporter relative to the CAD and weighted by each exporter’s market share.

The EER index is normalized at 100 as of January 2018. An EER value trending up indicates weaker Canadian competitiveness in global markets due to unfavourable movements in the loonie’s value against major competitors (and vice versa).

Table 1: Market share of selected exports: 2017-2019 average, 2020

Chart showing market share of selected exports: 2017-2019 average, 2020.

Source: UNComtrade.

Canada’s exchange rate competitiveness for wheat exports in the 2018-2019 pre-COVID period was stable according to the EER (Figure 1), although not as positive as the USD/CAD rate indicated. In fact, between January 2018 and August 2021, the USD/CAD exchange rate declined twice as much as the EER.

Figure 1: Canada’s wheat EER benefits from COVID’s impacts on Russia’s ruble

Chart showing Canada’s wheat EER benefits from COVID’s impacts on Russia’s ruble.

Sources: UNComtrade, Federal Reserve, FRED, Bank of Russia, Central Bank of Argentina, FCC calculations.

The further away from the base of 100 each bilateral exchange rate is, the more it has varied since January 2018. When extreme, the divergence reflects unusual currency volatility. The enormous deflation of the Argentinian peso (not shown) is one example. With 6.0% average market share in wheat markets (2017-2019), Argentina is one of the world’s largest exporters. Between January 2018 and June 2021, the peso lost 401% of its value amidst political and economic upheaval. That has weakened Canadian exchange rate competitiveness in global wheat markets.

COVID-19 introduced volatility to the world’s currencies. It led to a decline in the USD/CAD index value of the loonie, which improved the competitiveness of our wheat exports. And it also coincided with the end of the ruble’s depreciation that had begun in September 2018. Between January 2020 and June 2021, the ruble gained 20.5%. Both currency movements were significant for Canada: Russia and the U.S. have the two largest market shares of wheat exports (Table 1).

Ukraine’s economic rebound in 2018 created another major deviation from the base, helping strengthen Canada’s EER up to 2020. But the pandemic halted the hryvnia’s growth. Its large depreciation since January 2020, along with a recently depreciating USD, Euro and Australian dollar has helped offset the ruble’s continued appreciation.

The USD/CAD downward trend between 2018 and March 2020 boosted the competitiveness of Canadian beef in export markets against the U.S. However, the CAD value measured against the four largest beef exporters shows that as of May 2019, the Canadian currency started gaining value. The EER moved above 100 and was 6.7% higher in August 2021 than in early 2019.

Figure 2: Severe depreciation of Brazil’s real shifts Canada’s beef EER higher

Chart showing severe depreciation of Brazil’s real shifts Canada’s beef EER higher.

Sources: UNComtrade, Federal Reserve, FRED, FCC calculations.

The U.S. has been the world’s largest beef exporter, with exports averaging 15.1% of total global exports (2017-2019) (Table 1). Australia was a close second over that period, averaging 14.6% of total exports. Between January 2018 and the start of the pandemic, the Australian dollar lost value against the CAD, putting pressure on Canada’s beef EER and offsetting the support to the EER provided by a strong, stable USD.

The biggest influence on Canada’s EER may be Brazil (with 12.7% average market share of beef exports, 2017-2019). The Brazilian real had been depreciating since 2018 within a widespread devaluing of emerging economies’ currencies, and the onset of COVID-19 exacerbated the slide, raising Brazilian export competitiveness. An important trade relationship has emerged concurrently.

In 2017, imports into China and Hong Kong totaled US$5.1 billion or 12.3% of total beef imports, making them the world’s largest beef importer (marginally ahead of the U.S.). Their imports had increased by a staggering 33.9% AAG each year between 2017 and 2020 when China/Hong Kong imported 26.5% of global beef imports. China’s growth has come largely from Brazil who in 2020, supplied just over 40% of Chinese imports, and Argentina with 17.5% of Chinese imports. Brazil’s growth in China helped catapult it to the top spot in 2020, with 16.6% of global beef exports, ahead of the U.S. and Australia. Despite growing our respective total exports to China/Hong Kong between 2017 and 2020, the U.S. has gone from 14.1% to 6.7% market share, and Canada has fallen from 3.6% to 1.2% market share of Chinese imports.

With greater competitiveness in pork markets than in beef, Canada was able to grow our YoY pork market share in 2020, thanks at least in part to a relatively favourable exchange rate environment (Figure 3). There are no outlying exporters in pork with both large market shares and rapidly deflating currencies unlike in beef markets.

Instead, the strengthening CAD relative to the Euro up to February 2020 was offset by relative losses against the Danish krone and the USD. During the pandemic, Canada has lost exchange rate competitiveness to all three competitors.

Figure 3: Canada’s exchange rate competitiveness fades in pork markets during COVID

Chart showing Canada’s exchange rate competitiveness fades in pork markets during COVID.

Sources: UNComtrade, Federal Reserve, FRED, FCC calculations.

Our trade performance going forward may well depend on China's willingness to import more from Canada. Canada's pork exports to China dropped off in 2019, and while they grew in 2020, they have yet to regain lost market share.

Canadian canola exports comprised, on average, about 38% of total global canola exports between 2017 and 2019. That’s low. Usually above 40% market share per year, Canadian exports slipped in 2019 due to reduced Chinese imports. With that kind of dominance, exchange rate competitiveness becomes less of an issue (Figure 4). Although the EU-27 is a large consumer/producer of rapeseed/canola, used primarily in biodiesel production, we excluded them from the analysis as most canola/rapeseed exports from countries in the Euro-19 are to other Euro-19 countries.

The CAD canola EER is computed with currencies from Australia (8.9% AAE, 2017-2019), Romania (4.3% AAE, 2017-2019) and Ukraine (9.4% AAE, 2017-2019) (Table 1). The Index hovers closely to the base of 100 over the 2.5-year period. Whereas the loonie strengthened relative to both the Australian and Romanian currencies suggesting weaker Canadian competitiveness, the early appreciation in the Ukrainian hryvnia from early 2018 has helped our exports remain as competitive as they were in January 2018.

Figure 4: Canada’s dominance in canola markets and offsetting impacts from competitors lessens EER movement

Chart showing Canada’s dominance in canola markets and offsetting impacts from competitors lessens EER movement.

Sources: UNComtrade, Federal Reserve, FRED, FCC calculations.

An effective exchange rate analysis for Canadian agri-food

While USD/CAD exchange movements suggest the loonie conferred a competitive edge to our ag and food exports between January 2018 and April 2020, the EER indices for four sector-specific commodities suggest otherwise (Figure 5).

The steady growth in CAD value against the USD since April 2020 has had minimal impact on our relative competitiveness for pork and canola, which European and Canadian exporters dominate. Both the beef and wheat indices show the impact of large currency depreciation of our non-U.S. competitors. That’s an important assessment to make, given Brazil’s devalued currency seems to have had an appreciable influence on our weakening trade performance in beef markets. Further, as a very small canola/rapeseed exporter, the USD would play only an indirect role in Canada’s EER for canola markets through its influence on the global soybean trade. Overall, the use of sector specific EER indices allows for more accurate evaluations of current exchange rate environments.

Figure 5: Sector-specific EER indices provide a more accurate description of Canadian competitiveness

Chart showing grocery sector-specific EER indices provide a more accurate description of Canadian competitiveness.

The bottom line

The importance of Canada’s trade with the U.S. can barely be overstated, and the CAD-USD is a key driver of our global competitiveness. But it’s not the only driver. We’ve illustrated this by analyzing commodities important to Canadian trade performance, each of which has a different relevant basket of currencies.

The Canadian Effective Exchange Rate (CEER) index offers precise measurement, using 17 foreign currencies from countries accounting for at least 0.5% of our non-oil exports and imports. Capturing the influence of currencies from our largest ag and food importers would further extend this report’s EER analysis.

Looking ahead to 2022, we expect higher energy prices to support the Canadian dollar and keep it slightly above its current value of US$0.80 for the rest of 2021. If recent energy futures prices observed in Europe translate into significantly higher inflation rates across the European continent, the Canadian dollar should stay above €0.69 for the rest of the year and into 2022.

Martha Roberts
Economics Editor

Martha joined the Economics team in 2013, focusing on research insights about risk and success factors for agricultural producers and agri-businesses. She has 25 years’ experience conducting and communicating quantitative and qualitative research results to industry experts. Martha holds a Master of Sociology degree from Queen’s University in Kingston, Ontario and a Master of Fine Arts degree in non-fiction writing from the University of King’s College.