Volume 2 Issue 5 | March 1, 2010

In This Issue ...

 

Staying competitive under a petro-fuelled loonie


The sting of the global economic crisis still smarts but as economies around the world begin to stabilize many are wondering what the next few years hold in store for them. One of the critical issues ahead for Canadian cattle producers will be finding new ways to remain competitive with the Canadian dollar near par and an exchange rate fuelled by the price of oil.

Producers will have to adapt to this new kind of world because “we’re not going to have a fixed exchange rate system in Canada,” said Glen Hodgson, senior vice-president and chief economist of the Conference Board of Canada.

“We can no longer rely on cheap currency for international competitiveness,” he said during a presentation on the global economic outlook at the Alberta Beef Industry conference in Red Deer, Alberta.

In short, producers cannot rely upon the dollar going back to 85 or 80 cents.

Hodgson said the board’s forecast is very much driven by the link between the currency and global commodity prices. There’s a very close correlation between the oil price and the exchange rate and, though not quite one-to-one, relationship enough to comfortably deem it the new normal for the exchange rate.

“To stay competitive, we’re going to have to do very different things to live in a world where the dollar is heading towards par and, frankly, at some point this year may even go beyond par,” Hodgson told the crowd.

The dollar could go to $1.05 or $1.10 if oil – currently hovering between $75 and $80 per barrel (/bbl)- spikes to $90 or $100/bbl.

The Loonie and the Oil PriceGoing forward, the board’s model assumes oil will go through $100/bbl in 2011 and $120/bbl in 2014, which means continued strong upward pressure on the currency, Hodgson said. (The board has since revised its oil price assumptions downward and now expects oil to go though $86/bbl by end-2011 and $115/bbl by end 2014.)

“So when you think about how you run your operation, it means bad things in terms of the revenue you get from exports but good things in terms of input costs. It means you can import whatever you want at a good price,” he said.

That means it’s a good time to import machinery or equipment that would help give a Canadian business a competitive advantage. Hodgson said this is the kind of confidence he’s seeing in firms across the country, in terms of taking advantage of the fact that the currency can no longer be the source of competitiveness for Canadians.

How quickly various regions are forecast to recover from the recession will also help determine where opportunities lie for the industry. Hodgson said the global recession has ended in most countries and Canada was one of the first countries to come out of it, having created jobs as early as last June.

It’s safe to say that North America has stabilized and growth is returning in many parts of the world, creating what some economists are now terming the LUV recovery.

The ‘L’ is in Japan and Europe, where recovery will be weak. Although the Japanese are rich and want to buy goods, Japan has a shrinking workforce and population base. Moreover, one-quarter of Japan’s society is 65 or older and that’s going to keep growing -- an important fact to consider when looking at Japan. Japan is a high income market with not a lot of growth potential, but one could always gain market share, he said.

Western Europe is also wealthy and aging very quickly. However, perceived growth in Germany, France and in many other countries is coming back very slowly. Britain was hit as hard as the U.S. by the financial meltdown. There’s not a lot of dynamic growth going forward, he said, which is important to know if producers want to sell into that market.

Hodgson added while he’s pleased that Canada is now seriously pursuing negotiations with the EU on a free trade area with an aim to get more Canadian product into the European market, producers shouldn’t view it as the boom market.

The ‘U’ shaped recovery is North America, which is stabilizing. The board is forecasting real GDP growth of almost three per cent in both Canada and the U.S. this year. Aiding this is the fiscal and monetary stimulus packages in the U.S. and Canada, job gains and low financing rates that help spur household spending.

The ‘V’ shaped recovery is Asia. Several emerging markets, led by China and India, had no recession and will rebound strongly, he said. Australia avoided the recession altogether because of their deep trade relationship with China.

In Canada, growth will be much more well-balanced than in the U.S. The board is forecasting every province to grow in 2010, led by B.C. But it’s still fragile; Hodgson said it will take most of this year to rebuild confidence with improvements in growth to come in 2011.

So while the recovery has begun, it’s not a robust recovery. As an industry, beef cattle producers are facing a Canadian dollar that’s pretty close to par and an understanding that their input costs will keep rising over time.

“But at least there’s some growth in the demand there, so you can look at ways to grow market share and actually have an expanding U.S. market for a variety of products,” Hodgson said.

 
CCA President helps forge future for young ranchers


The launch of The Brad Wildeman Youth Mentorship Foundation at the Saskatchewan Beef Industry Conference in January marked the fruition of a long-held vision of the Canadian Cattlemen’s Association President. Brad envisioned a trust that would provide young leaders in the agriculture industry with opportunities to build and hone their skills through mentorship experiences.

The newly-formed Foundation ensures young leaders will have those opportunities for many years to come. Work is underway to set up the structure of the Foundation and get the appropriate tax status, as well as sort out other issues related to early-stage development. The Foundation will be designed to have lasting benefits for the entire cattle industry as young leaders in agriculture are formed.

Brad’s goal is to see the Foundation eventually grow to more than $1 million. It’s already off to a solid start, with former CCA Policy Manager Kelsey Loran surprising Brad at the conference with both the announcement of the Foundation and, as seed money, a $3,000 cheque jointly-donated by the Saskatchewan Cattle Feeders Association, Saskatchewan Stock Growers Association and Pound-Maker Ag ventures.

Industry came on board in a big way during the event, and through their generosity pushed that amount to $10,000 before the night was through.

Look to Action News for updates on the development of this important initiative.


 

Who says it’s chilly out there?


Heritage Angus Beef Burgers, sold through Prairie Halal and produced by New Food Classics in Calgary and Saskatoon, was among the finalists in the Best New Frozen or Chilled Food Award category at Gulfood 2010 in Dubai. The event, held Feb. 21-24, is the Middle East’s leading dedicated event for the foodservice and hospitality sectors.

Cliff and Beverly Drever of Camrose, members of Prairie Halal Foods, which is a branch of Prairie Heritage Beef, were at Gulfood 2010 to take in the good news. The event featured more than 1 million square feet of exhibitors from around the world and attracted 750 industry representatives.

 

When it comes to animal care, producers know best


Over the last several years animal care has increasingly been in the news. But the news is often driven by groups that do not directly care for animals. Instead, they operate apart from those providing responsible animal care. Unfortunately, many work to impede or eliminate responsible animal agriculture for political or ideological reasons. Those interested in animal rights more than animal care often have a stated goal of ending animal agriculture. These groups use all kinds of tactics to draw attention to their demands including: stuffing the mailboxes of politicians, coercing food companies and intimidating farmers, outrageous publicity stunts and sophisticated marketing campaigns. While this goes on, Canada’s ranchers and farmers are not making news. Instead, they continue their daily chores making sure their animals are healthy and well cared for to protect them from harm.

As the voice of the men and women responsible for the daily care of Canada’s 11.5 million beef cattle, calves and feeders, the CCA wants to ensure Canadians are informed on this issue.

It is important to know who you are supporting. Canadians are fortunate to have groups that focus on animal care. It is these groups who need support. Generous Canadians wishing to donate time or money to help animals should look to organizations interested in caring for animals. Farm Animal Care Councils in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario have an impressive record of advancing farm animal care. Local shelters and legitimate humane societies are always struggling for the funds they need to provide their hands-on work. The Canadian Federation of Humane Societies is a national advocate for animal care while provincial Societies for the Prevention of Cruelty to Animals (SPCA) are on the front lines. While these groups make the headlines less often, they are the ones making a difference for animals.

High profile confrontational groups are more interested in the politics of animal use, with how people live and with limiting the right to choose.  Humane Society of the United States (HSUS) and People for the Ethical Treatment of Animals (PETA) are two of the bigger organizations with this type of agenda (Humane Society International is the HSUS arm in Canada). Despite their high profile headlines, few of their efforts help to advance animal care, something our cattle producers do each and every day. Ranchers and farmers focus their efforts on providing sound animal care because it is their chosen livelihood and it is the right thing to do.

So if you are asked to donate, buy a certain product or vote a certain way, dig a little deeper into who is asking.  Is the organization that is making the request on the front lines of caring for animals or are they trying to change your lifestyle, limit our food choices or put responsible people out of business? When it comes to providing support for animal care, Canadian farmers and ranchers want the public to make informed decisions. Beware of organizations out there that would rather you donated to them or did what they asked under the false impression that they are working for animal care.

 
CCA Action News

Staff Contributors: Jill Harvie, Ryder Lee.
Written, edited and compiled by: Gina Teel.



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