Volatility in the Canadian dollar has become a key marketing factor to watch for Ontario producers, perhaps even more so than futures market gyrations, says Steve Kell of Kell Grain Elevators.
Kell, who provided an overview of the corn, wheat, soybean markets at the Ontario Agricultural Conference last month, said the decline in the loonie – which fell from just about 76 cents US to under 70 cents over the past year or so – added more than C$1/bu to the price of soybeans for Ontario producers over the same period.
“The reason this is so important to us is there is no reason to expect anything to move the (soybean) futures market a buck,” he told the crowd. “The biggest potential volatility that we have in grain pricing right now is movement in the Canadian dollar, certainly in the past year.”
As of Monday morning, the spot Canadian dollar was trading at around 69.82 cents US against the greenback.
Because a significant amount of world agricultural trade is denominated in US dollars, the Canada-US exchange rate can have a major impact on farm returns on this side of the border. And while some inputs are more expensive with a lower Canadian dollar (including fertilizer, machinery imported from the US), it’s generally accepted that Canadian exporters enjoy a net benefit as the loonie loses ground against its American counterpart.
“That’s a big help in terms of marketing grain; I don’t know about importing fertilizer, but in terms of being able to achieve better gross revenue on the farm, this lower dollar is a big deal,” Kell said.
Kell attributed the fall in the Canadian to a few different factors, including the lower Bank of Canada policy rate versus the Federal Reserve rate, a relatively weaker Canadian economy, and the higher Canadian unemployment rate. Threatened tariffs by US President Donald Trump – which could take effect next month – remain a major wildcard in the Canadian economic and dollar outlook.
As things currently stand, Kell projected the loonie to continue to trade around its current level.
“I think we’ve got a Canadian dollar that’s going to sit 70 cents US or lower. And then, if stuff starts to come unglued in terms of cross-border trade, we could go lower from there.”
In Farm Canada’s 2025 economic outlook, economist Krishen Rangasamy said he expected the Bank of Canada’s policy rate to fall to 2.5% from the current 3% by the end of 2025, with the Canadian dollar likely to hold at around 70 cents US – in the absence of American tariffs.
