How changes to the US economy will affect growers
September 12, 2012 By Treena Hein
With last week’s release of weak job numbers in the US, all eyes are the Federal Reserves’ meeting this week. What is decided at this meeting will affect Canadian greenhouse operators in a few ways, says 360 Energy’s Lisa Brodeur.
“The Federal Reserve staff will have a tough decision to make, to keep interest rates low and provide more economic stimulus, or continue to wait and see how the economy reacts on its own. The Federal Reserve Chair Ben Bernanke has a mandate to keep both inflation and unemployment low in the US.
Currently inflation is under control, but unemployment continues to stay above eight per cent. Hence the push for further economic stimulus to improve that situation.
What would an announcement from the Federal Reserve mean for growers here in Canada? For starters, any supplies that are sourced out of the US will become cheaper. If further quantitative easing is implemented in the US, the US Dollar loses value in comparison to the Canadian dollar and items purchased in US Dollars become more reasonably priced for Canadians.
Secondly, natural gas users will see a drop in Canadian pricing. As natural gas is priced in $US/MMBtu then converted to CDN/GJ, natural gas also becomes sold at a discount for anyone north of the US border. With the time coming up for annual renewals and winter heating, this is a welcome thought for many.
Third, growers can expect to see the price of crude oil and therefore gasoline and distillate fuels to rise. As these items too, are based on US pricing, we can anticipate higher costs as investors take their money out of currencies (as quantitative easing devalues currency) and move it into commodity markets – primarily oil. Oil and oil products (like plastics) begin to rise in price and will have an effect on supplies as well. Keep this in mind for budgeting purposes! You don’t want to be caught off guard.
Lastly, if quantitative easing takes place and the US economy begins to rebound, a rise in commodity prices across the board will occur, as demand typically picks up and manufacturing returns at higher levels. This will be the ultimate objective for the Federal Reserve, as it has been since 2009 when it first began this process.
While a grower’s primary focus is of course on production and making sure they have the best product they can possibly present to the marketplace, it is imperative to keep in mind some of the outside factors that will impact their overall business environment. Small changes can have a serious impact to your bottom line.
Lisa Brodeur is a Quality Assurance Supervisor at 360 Energy.
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