Ag Economists Predict Persistent Low Interest Rates, Weak Dollar

Ag Economists Predict Persistent Low Interest Rates, Weak Dollar

on November 15 | in Ag News | by | with No Comments

From FCC Express

By Neil Billinger

Two of the country’s leading agricultural economists predict Canadian farmers can look forward to continued low interest rates and a weak dollar, which therefore improves the bottom line for exported goods sold in American currency.

Warren Jestin, Scotiabank senior vice-president and chief economist, says the United States has become the centre of attention for global investors.

“It is one of the reasons why their dollar has risen and why their interest rates have stayed low,” Jestin says. “The core message is that the U.S. dollar is going to be strong over the next couple of years.”

There are few alternatives for investors, he says, especially with the European economy in a fragile state. The European Union is experiencing geo-political risks, high debt levels and large youth unemployment. Emerging economies, such as Russia and Brazil, are dealing with recessions. Scotiabank forecasts 6.5 per cent growth in China in 2016 – well below the double digit increases recorded in previous years.

Low world oil prices will continue to slow domestic economic growth and should discourage the Bank of Canada from boosting interest rates. Jestin projects “a little bit of a rebound in oil, but not a lot over the next 18 months.”

All of these factors point to a Canadian dollar remaining in the 75 cent U.S. range.

“Maybe two or three cents higher or two to three cents lower, but it certainly doesn’t have major push on the upside I think over the next 18 months,” Jestin says.

J.P. Gervais, Farm Credit Canada’s chief economist, agrees.

“The Canadian dollar at 75 cents helps a lot,” Gervais says. “It really helps in terms of profitability. So as long as we have a dollar below the 80 cent range, I think we are likely to see a very positive outlook for 2016 and beyond.”

Jestin and Gervais made their comments at a state of the industry agribusiness and agri-food seminar last week. The first-time event was sponsored by Farm Credit Canada and the Saskatchewan Trade and Export Partnership.

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