November 20, 2008

Currency devaluation boosts Canadian meat exports


Canada's pork and beef exports have been boosted by the weakening Canadian dollar, but not all are smooth sailing, according to industry players.


International transactions are in US dollar, therefore the rate of return has vastly improved for Canadian meat producers, said Brad Marceniuk, livestock economist from the Saskatchewan Ministry of Agriculture.


However, senior market analyst Kevin Grier warned that benefits are not always felt immediately.


The main effect of a weaker Canadian dollar is that domestic pricing is impacted, but Canada in theory will become more competitive in certain export markets, said Grier.


Grier said Canada should be able to compete more effectively in the Japanese market than the US due to the weaker Canadian currency.


Still, Grier cautioned that the benefit of a weaker Canadian dollar is also disillusional and fleeting.


Grier said, "When the Canadian dollar was trading at 65 US cents, it did not result in Canada being more competitive, but rather meant Canadian processors were able to price the product lower. The way a company becomes more competitive is not through the depreciation of a currency, but rather in the investment and in the increase of productivity."


A weaker currency does not always help move product, said Chenier La Salle, vice president of International Programming for the Canadian Beef Export Federation.


Processors are currently selling Canadian beef products at the same price prior to the weakening of the Canadian dollar, as international buyers were used to paying a certain price, therefore margins for the Canadian beef processors have remained unchanged, said La Salle.


Marceniuk, on the other hand, felt that the weaker currency was benefiting the pork sector.


Maple Leaf and Olymel have increased pork production in association with the weaker currency, said Marceniuk.

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