Canadian Dollar`s Relentless Climb Could Soon Put BOC In A Bind

[MichaelReimneitz]

Let's hear some different precpectives on the Canadian dollar and economy. I found this in the Wall Street Journal. http://online.wsj.com/article/BT-CO-20110406-713839.html



As stated in this article "Canada has a lot of what the world wants" Oil Exporter, Natural Gas Exporter, Metals, Ferterlizer, yet they clearly forgot the to mention the most important piece of this equation agriculture and food.



Also stated in this article "foreign investors buying into Canada's commodity sector "approximately C$20 billion in deals yet to be finalized" WOW !



Clearly as the worlds population continues to increase and world disasters increase due to climate changes, there is going to be a shorted of food and we are going to see commodities sky rocket even further. Would you pay $10 dollars for your morning cup of coffee?



Is food, and Fuel the next GOLDEN commodity......I think so!



It's a good time to be a Proud Canadian as we live in one best countries in the world, yet it amazingly we are still running a deficit with all these commodities......Is this deficit and government spending necessary to keep the Canadian dollar inline with other G7 countries and down play our golden handshake ?

 

[bizaro86]

[quote user=MichaelReimneitz]yet they clearly forgot the to mention the most important piece of this equation agriculture and food



I'm not sure why you would think agriculture is the most important piece of this equation, as the data does not back this position up. Canada's agriculture exports were ~36.9 Billion last year, less than the energy, industrial goods (mined ores/fertilizers), machinery and equipment, and automotive categories. The only major category agriculture exceeded was forestry exports, which have been in a huge decline due to US housing and the decline in newsprint use.



Source: http://www40.statcan.gc.ca/l01/cst01/gblec04-eng.htm



Canada's agriculture exports are certainly an important piece of our economy, and farmland might even be a good investment (how much can you borrow against farmland LTV/rate?), but it's certainly not the most important or biggest growing export.



Regards,



Michael

 

[fumbrunner]

[quote user=MichaelReimneitz]It's a good time to be a Proud Canadian as we live in one best countries in the world, yet it amazingly we are still running a deficit with all these commodities......Is this deficit and government spending necessary to keep the Canadian dollar inline with other G7 countries and down play our golden handshake ?





Virtually every industrialized country is running a deficit and our is among the smallest as a percentage of GDP. I fail to see the connect between government spending and the state of the Canadian dollar. Would you care to elaborate on that?

 

[MichaelReimneitz]

Firstly great find on Stats can, and thank you for challenging this issue and sharing this information. This is exactly the response I was trying to trigger. REIN philosophy is to always be ahead of the curve as far GDP and Job growth more so from a residential angle, just trying to put a different perspective on world issues.....



I find the world food issue to be very interesting, just stating the fact that is particular article made no reference to our agriculture industry something I foresee being a major issue in the future. Do you think Canada`s agriculture numbers will increase ? I'm not advocating to run out and purchase a bunch of farm land, just trying to predict the future.



http://www.businessweek.com/ap/financialnews/D9MD20900.htm



http://www.sciencealert.com.au/features/20101804-20862.html



http://theemergencyfoodsupply.com/archives/the-coming-global-food-shortage



http://www.forexyard.com/en/news/POLL-corn-prices-to-jump-to-new-peaks-within-months-2011-04-07T115934Z-US



http://www.businessweek.com/news/2011-04-05/corn-advances-to-33-month-high-as-demand-erodes-u-s-stockpiles.html



http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=40306&Cat=5&dt=4/7/2011



Great question about farmland and LTV rate. It used to be he owned the land had all the wealth.....Just a though.

 

[MichaelReimneitz]

[quote user=fumbrunner]Virtually every industrialized country is running a deficit and our is among the smallest as a percentage of GDP. I fail to see the connect between government spending and the state of the Canadian dollar. Would you care to elaborate on that?







Thanks for the challenge. I don't know if there is an exact correlation between our dollar value according to the countries deficit and government spending. That's a very loaded question .



You are correct when you mentioning our country having the lowest deficit but we also have the lowest population and the one of the largest land masses. That helps, less people, less demands for basis commodities, such as FOOD, FUEL, OIL, FERTILZERS etc.




Population of Each G7 Nation

The population statistics below are July 2008 estimates from the CIA World Factbook.



[list type=decimal]
[*]United States ... 303.8 million people
[*]Japan ... 127.3 million
[*]Italy ... 58.1 million
[*]Germany ... 82.4 million
France ... 64.1 million
United Kingdom ... 60.9 million
Canada ... 33.2 million.
[/list type=decimal]


Check this out if you are interested



http://www.statcan.gc.ca/pub/67-202-x/2010004/part-partie1-eng.htm

 

[bizaro86]

http://www.ontariomortgagesuperstore.com/land-mortgage-farm-mortgage



This indicates that the maximum LTV on farmland for a 1st mortgage is 55%, but it's only one source, so mileage may vary.



As for residential real estate, I'm not sure that I see how increased food prices would affect it. Maybe higher crop prices are good for the Canadian economy as a whole, but the people who benefit most from higher crop prices (farmers) aren't typically renting residential real estate in cities/town, where most of us invest.



I actually think farmland might not be a bad investment, as it's price will likely go up with food price inflation, although the low LTV would deter me. I don't think food price inflation will make much of a difference to residential real estate, except maybe in a few specific cases (ie, food price increase causes potash prices to increase, which increases the value of residential real estate in parts of Saskatchewan that focus on that industry, etc)



Regards,



Michael

 

[jonathanb]

Around home, farm land is a tough go. Appreciation may be good, but renting it often doesnt carry your costs. You may need lots of cash to make it work. Not sure about the western provinces though...



jon

 

[fumbrunner]

[quote user=MichaelReimneitz]I find the world food issue to be very interesting, just stating the fact that is particular article made no reference to our agriculture industry something I foresee being a major issue in the future. Do you think Canada`s agriculture numbers will increase ? I'm not advocating to run out and purchase a bunch of farm land, just trying to predict the future.








I don't think you need to be Nostradamus to predict that ongoing food supply will be tight and thus commodity prices will continue to increase in the long term. There is only so much aerable land on this earth and the earth's population continues to increase.



The challenge for Canada is whether we will be satisfied being the breadbasket to the world, shipping bulk commodities out like we do today, or whether we want to take the next step and ensure that value-added manufacturing of those commodities stays here. That is where there is great potential. To date, it seems like the former is winning out. Innovation does not seem to be a large priority for Canada, unfortunately.

 

[Thomas Beyer]

[quote user=fumbrunner]shipping bulk commodities out like we do today


Indeed .. way too much oil, logs, unprocessed wood, grain, coal, uranium, potash etc. is shipped out unprocessed !



We could do a LOT better as a nation to just add a little more value here !!!



Note that the Alberta government recently announced a new upgrader NE of Edmonton to upgrade raw bitumen it receives from oil producers (yes, instead of cash the AB government actually gets the raw material) ! A major multi-billion $ investment with lots of construction and ongoing maintenance jobs !!



A step in the right direction !!



We ship whole logs to China .. and buy furniture at Ikea made in China, Indonesia, Poland .. what is wrong with this picture ?



We subsidize an inefficient car manufacturing industry and also oppose a pipeline from Edmonton to Kitimat in BC .. WEIRD !!



Canada's $s could easily be $2 US soon if we actually added some real value to our resources and/or taxed resources, owned BY THE PEOPLE, far higher !!



Canada's CPP or Alberta investment co (AIMCO) are actually quite large sovereign wealth funds .. so we'll do FAR BETTER in a few years [unless Jack L or Michael I gets elected, of course .. then the $ will be below par in no time]

 

[MichaelReimneitz]

[quote user=ThomasBeyer]Indeed .. way too much oil, logs, unprocessed wood, grain, coal, uranium, potash etc. is shipped out unprocessed !



We could do a LOT better as a nation to just add a little more value here !!!




Fumbrunner & Thomas, you make some great points, especially about the Auto industry and unprocessed commodities, Thomas maybe you should up your bar and run for politics..........



I'm also a proud Ontario teacher although I'm not relying on this pension, it's great to see our net assets exceed 107 billion and ROI of 14.7% last year and there still not happy got to love teachers........



http://www.otpp.com/wps/wcm/connect/otpp_en/home/newsroom/news+releases/2011/teachers_beats_benchmark_2010



Maybe the Ontario Teachers Pension Fund should be investing in Alberta like the China, instead of purchasing assets all over the world or the Canadian Pension Plan. Sadly the the Ontario Teacher's Pension plan is just as stronger as our CPP.



www.agingsociety.org/agingsociety/publications/.../300largest.pdf



[quote user=ThomasBeyer]Canada's $s could easily be $2 US soon if we actually added some real value to our resources and/or taxed resources, owned BY THE PEOPLE, far higher !!


This would put a huge damper on the our manufacturing sector if not totally whip it out, although maybe our manufacturing sector should start diversifying in areas that will help us make better use of our commodities. Sadly they are very dependant on our dollar.



I definitely agree that we need to start making better use of what we have to offer......

 

[Thomas Beyer]

[quote user=MichaelReimneitz]making better use of what we have to offer.


one has to lever one's strength .. such as the huge hydro or coal or uranium or oil or gas or potash or forestry or agricultural land reserves this country has .. HUGE potential still for decades to come .. HUGE !!



Why artificially support milk, egg, asbestos or manufactures if we have so many other resources that could be exploited and marketed far better !!



it is beyond me why only NOW do they invest in hydro power on the upper Churchill river for Newfoundland, for example ..

 

[bizaro86]

[quote user=MichaelReimneitz]Thomas maybe you should up your bar and run for politics..........





I don't agree with the idea that politics is a more worthy endeavor than those of us creating real value in the real world. As opposed to politicians, who by definition spend their time (and our money) only on things that people wouldn't choose to do for themselves. (If people wanted to do it themselves, there would no need for laws. Paying taxes is mandatory, because otherwise nobody would pay them.)



Regards,



Michael



Edited to add: Politics from the Latin, Poly meaning many, tic meaning small blood sucking insect