It’s a dry read and I’m sure it’ll be a few days before any of us figure it out. On May 3rd the Canadian International Trade Tribunal released its reasons why the import of cheap subsidized American corn is no threat to the Canadian corn producer. Your loyal scribe fresh from his tractor seat read through as much as I could stand. In fact I knew some of the people who did the research. One of them once told me “farmers are producing garbage”.
However, I don’t want to bias the debate. I know some of you won’t be so charitable. The following is an example of one subsection of the ruling.
In light of the above, it is clear to the Tribunal that the decline in seeded acreage is partly attributable to the declining price levels for grain corn in Canada. However, the Tribunal has already found that the decline in the domestic selling prices of grain corn is essentially attributable to the appreciation of the Canadian dollar and other factors unrelated to the subject goods.43 Therefore, the decrease in seeded acreage cannot be attributed, in any significant way, to the subject goods.
You can get the whole thing by going to http://www.citt-tcce.gc.ca/dumping/inquirie/findings/nqin2e_e.asp
More of this will surely be coming out this week. For Canadian corn producers is has been the worst of times. This is taking place even at a time when December corn futures are currently in the top one third of the market. Some producers are picking their poison and booking corn for anything over $3.00. Others aren’t growing it. Others are just contemplating how they can plant anything with a 90-cent dollar.
It made me ask a few farmers last week, where they were in 1978? In the year 2006 that almost seems pre-historic. So what’s so special about 1978? It just so happens with our dollar above 90 cents US, that’s the last time our loonie got so high in the foreign exchange stratosphere.
So we are in some very uncharted territory. As bad as things have got on the farm, I like to tell farmers I’ve seen worse. However, with our 90-cent dollar taking me back to 1978, I wasn’t even in business back then. I have no idea how it was to “work and compete” in a 90-cent world. Unfortunately for me and many other Canadian farmers, we don’t have a lot of time to contemplate our new working environment. Getting used to a high dollar is something we’ll be working with for the foreseeable future.
Here is a chronology of the loonie’s value over the last 28 years. Source: Globe and Mail.
JANUARY, 1978 – 90.8¢ U.S.
JANUARY, 1985 – 75.6¢
JANUARY, 1990 – 86.4¢
JANUARY, 1995 – 71.3¢
JANUARY, 2000 – 69.1¢
JANUARY, 2002 – 62.6¢
JANUARY, 2006 – 89.4¢
You can see that it’s been a bit of a roller coaster. However, keep in mind 28 years is a long time. Careers are made in that time. Lives are lived. It’s a long time between January 1978 and today, but everybody can measure the time between January 2002 and today. In that span the loonie jumped 43%. That’s huge and for anybody employed in the sector of the economy highly dependent on exports it’s a kicker. Anytime you raise prices 43% there is bound to be some push back.
Remarkably the greater Canadian economy has adjusted to this rather well. The unfortunate part is there is a great imbalance between sectors of the Canadian economy. Alberta is a kingdom of its own. It’s wealthy and getting wealthier. Everybody knows somebody who has moved there. The rest of Canada is adjusting.
For Bank of Canada Governor David Dodge this must be a real challenge. He has to balance Alberta with everybody else. At the same time, US Federal Reserve Chairman Ben Bernanke has signaled the US economy might be slowing and he is done raising interest rates. Dodge on the other hand is worried about inflation so he’s set to raise them. This US Canadian interest rate inversion is a green light for overseas investors to put their money in Canada. It’s a green light to the buy the loonie. That’s one reason it rose 1.8% last week alone.
Just last week China raised its benchmark interest rate to 5.85% from 5.58% making it more expensive for Chinese companies to borrow money. The Chinese are worried about inflation. With there huge economy growing at 10.2% in the first quarter of this year, maybe they have something to worry about. However, is this Chinese move the first of many? Is it following a pattern globally like David Dodge’s move? How will this affect us back on the farm?
It’s hard to say. Clearly our interest rate gyrations and bureaucratic decisions from agencies like the CITT are rocking our world. Let’s hope for a foreign exchange miracle to ease the pain. How about an 84-cent loonie by Christmas? Let’s hope so. Farming in our 62 cent world way back in August of 2002 seems like eons ago. Now that we are at 90 cents, its almost like we didn’t appreciate what we had.