exchange rates

     The total demand for US Pork can be conveniently broken down into two components: domestic demand plus net exports.  Net exports is the excess of exports over imports of pork for the US.  We seem to know that US production of pork will be falling in 2009.  I say seem to know since this is based on projections by USDA (Hogs and Pigs Report).  What we do not know is if the projections are correct (what is their error variance) and what will happen to productivity increases to offset this decline in farrowing intentions from last fall.  We can surmise that the sows leaving the industry are the poorest performing ones (least productive) and that productivity gains from the remaining farms is likely to rise.

     Canada is a commodity economy.  While commodities were suffering as the poor step sister of branded items, Canadian exchange rates were relatively low and it was a nice place to produce things like hogs and export.  A significant share (much larger than the U.S.) of canadian pork found its way to finishing houses, slaughterhouses and kitchen tables outside of Canada and all over the world. 

     When the rise in demand for the lowly commodities began to accelerate in the last few years, engendered by the steamrolling growth of China, India and emerging nations of the world, all of that changed.  In order to buy Canadian lumber, minerals and oil, these nations have to demand the Canadian dollar to pay for them.  This has resulted in a dramatic increase in its purchasing power especially relative to the U.S. dollar.

SwineCast 0252 Show Notes:

• Do you have the power? BI's fun feature video
  
• Dr. Claudia Mobley looks at five macro consumer trends that will affect all business
• Fusion in Japan with much interest in all things American
• Exchange rate pain from producers and suppliers north of the border