The Foreign Exchange Gods and Our Southwestern Ontario Economy
On Monday of this past week I was in Ancaster Ontario speaking to the Wentworth Soil and Crop Association. I had been invited last year but I was in Bangladesh at the time so they were trying to ask me back.
I must say that that is one part of Ontario I don’t know very well. The Hamilton area I don’t get to very much and I get mixed up very easily there. The only other area of Ontario I get easily mixed up in is Ottawa. So when I made the wrong turn in Ancaster and it took me an extra 15 minutes to find my speaking venue I really shouldn’t have been surprised.
I’m doing a few different things this winter, one being the “Agriculture for Realtors” course, which I will be delivering this Thursday in London Ontario. So it was nice to talk about agriculture and agricultural markets in Ancaster. I didn’t have a lot of hope to give the group in Ancaster as agricultural markets seem to be slinking back to their old-fashioned ways.
That of course is a long story and something that I don’t talk much about in this column. However, there are some big similarities between some of the factors that affect the Canadian agricultural economy and our nonfarm economy. Of course one of the biggest ones that both sectors share is the value of the Canadian dollar. Excuse me for a minute, John, this column is about the value of the loony!
As you all know in southwestern Ontario we have been suffering from the terrible effects of the economic recession. While job numbers in the greater Canadian economy have been increasing, the Ontario economy has not seen the same type of job growth.
My question is how about if I could wave a magic wand and get us back a $.80 dollar? I think you would all agree that a $.80 dollar would certainly do something for the greater economy in Southwest Ontario. Overnight, we would have new markets in the United States and elsewhere to ship our products. I think I can hear the cash registers ringing and the proverbial jobs, jobs, jobs.
Of course the difficult part is getting the value of the Canadian dollar down to a level, which you think is real. Let me give you an example from a conversation I had last week. I met an acquaintance of mine who works at the large Suncor ethanol plant in Sarnia. On seeing me he engaged in a conversation about corn and about prices, things that I write about professionally. There is not a lot of hope in the corn market right now so I told him what we needed was for the dollar to go back down to $.80. He looked at me and said “like that is going to happen anytime soon! ”
The fact is the Canadian dollar closed on March 10, 2009 at .7827 US. On June 2, 2009 the Canadian dollar closed at .9272 US and a month later on July 6 it closed at .8615 US and a month later than that it closed at .9374 US. I think he was somewhat taken aback regarding my statistics off the tip of my tongue but I write about this stuff all the time. The point being with the loonie jumping all over the place in 2009 what’s to say it doesn’t continue and maybe there is some hope for those lower values ahead? If history repeats itself in 2010, we’ll see that loony back down.
I am hoping for that. The problem is there’s not a good reason for because commodities seem to be getting stronger even though oil is hovering around $78 mark. The Canadian economy is showing signs of recovery in interest rates are at record lows. So if the Bank of Canada raises rates it just makes the loony that much more attractive and the value will appreciate. Still, for the good of southwestern Ontario and the greater Canadian economy, I want that loony to go down, weigh down. The hard part will be getting there.
So in Ancaster Ontario, that’s what I told the members of the Soil and Crop Association. They are facing lower prices and there is not much hope except for that loonie going way down. Ditto for the greater industrial and service economy of southern and southwestern Ontario. If we could get the foreign exchange gods on our side, I’d have this economy booming in a few minutes.
So never say never because even though there’s not a good reason for the loonie to go down in value, it may still get there. The Bank of Canada would certainly like to see that. I want it too.