Canadian manufacturers in currency squeeze

SANDY PARKER REPORT, VOL. 31, ISSUE 36, NOV. 12, 2007
The following extract is reproduced with permission from Sandy Parker Reports, Weekly International Fur News. Sandy Parker has been covering the fur industry for more than four decades. For most of that time he has published a weekly newsletter, detailing results of international pelt auctions, wholesale price trends, business developments and movements in the trade, as well as economic and political activities that may impact on it.
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International Fur News
with Sandy Parker
Canadian manufacturers in currency squeeze
THE CONTINUED STRENGTHENING OF THE CANADIAN DOLLAR AGAINST ITS AMERICAN COUNTERPART is taking a heavy toll on fur manufacturers north of the border, both in terms of current business and future prospects. The loonie, having topped $1.08 U.S. last week, is now in record territory and may still be moving upward. Since the Montreal Fair in May, it has climbed approximately 20%. With invoices for merchandise sold to American retailers at the fair now coming due, Canadian vendors will be collecting in U.S. dollars worth that much less than what they had bargained for. Moreover, with Americans now having to pay a premium, they may reexamine their Canadian purchasing plans.
At this point, Canadian manufacturers are already figuring they worked this season for nothing, the U.S. dollar slide having more than erased their normal profit margins. Factoring in their booth and other costs to do business at the fair, their calculations are well into the red. One major producer noted that, in his best years, he made only 9% on his sales. Some of the more substantial operators, in anticipation of being paid in weaker American dollars, hedged their bets by buying currency futures, but that tactic proved to be only a partial cushion.
THIS IS THE FIFTH YEAR THAT CANADIAN MANUFACTURERS will have seen their profits shrink in line with a weakening U.S. dollar. But it is the first year in more than three decades that the loonie has reached or exceeded parity with the buck. In many of those years, its value was less than that of the greenback, hitting a low of 63 cents U.S. only nine years ago. In those years, the Canadians were paid in strong dollars and their profit margins were protected. As one philosophized last week, “we made it then, so now we’re giving back a little.”
IN THIS ISSUE:
Justice Dept. Drops Investigation
Agency Gives No Explanation
Civil Class Action Still Pending
Canadian Mfrs. In Currency Squeeze
U.S. Stores Weighing Options
For extracts from back issues of Sandy Parker Reports see News Index. Subscribers can access an archive of complete issues at www.sandyparker.com.
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