CDN $

[TOM4CWB]

Charlie;

We are on a tare... but the lower US $ has not increased US inputs near to the extent of CDN farm inputs being moderated.

From $.85 to $.91 is now @ 1.09 exchange.

It means about a 8% drop in prices in the last month. $25/t on Canola. $16/t on milling wheat.

Yet except on Glyphos, I have seen none of our other imputs come down... we are paying 35% more for many of our grain inputs in real CDN $.

DO you folks have any expectations where we are headed... for the fall Charlie on the CDN$?

[charliep]

My forecast for new fall would be higher but I will be too chicken to put a number on it. When I look at the charts, I note that the loonie has been increasing in steps/holding a range. Could be wrong but I see a trading range of 88 to 92 in the short term.

Just a highlight but it is not necessarily the loonie rising relative to the US greenback but rather the green back sinking relative to other world currencies. Have a look at the Aussie dollar, Euro and Yen.

http://futures.tradingcharts.com/chart/AD/66

http://futures.tradingcharts.com/chart/EC/W

http://futures.tradingcharts.com/chart/JY/W

[clancey]

I might add that opinion on the fate of the Canadian dollar is becoming more mixed, which indicates a higher degree of uncertainty among analysts about the outlook.

On the other hand, futures markets continue to pay a premium for forward Canadian dollars.

I suspect this is a strong statement on the huge budget deficits which have been run up in the United States under the Bush administration. Those become a drag on the economy, ultimately requiring an increased share of GDP go to financing government debt and reducing deficits.

At the same time, the euphoric strength of the U.S. dollar was unsustainable. It made the United States uncompetitive on export markets and needed to reverse itself for the mong term health of the U.S. economy.

I do not know what a correct exchange rate range is for the Canadian dollar, but we were seriously undervalued for a few years. We probably have to find out where we are over-valued before we can fall back and I we probably won't discover that point until it hurts industrial commodity exports. The first sign will probably be pressure on wages.