This comes at a time of chaos on Parliament Hill as the minority Liberal government is presently consumed by the party’s leadership race to replace Justin Trudeau as Prime Minister.

“We’re not in a position of leverage either. This is a spot where Parliament is prorogued and we’re probably going to have an election. None of this bodes well,” stated Rahim Madhavji, president of Knightsbridge Foreign Exchange Inc. in Toronto.

In terms of how much it would cost to buy an U.S. dollar with the loonie, Madhavji suggested the worst case scenario would the high C$1.40’s, maybe C$1.50 if the Trump administration imposed all of the 25 per cent tariff immediately.

However, Madhavji suggested the tariff might be applied incrementally, “maybe a half of a per cent or one per cent every month to give people more time to adjust.”

He said regardless of the current situation in Ottawa, he expects the federal government would roll out a stimulus package similar to that during Covid, but there would still be job losses, the resurgence of inflation and likely drop in Canada’s gross domestic product. Should that occur, he said the Bank of Canada could accelerate its interest rate cuts to help jump start the economy.

Meanwhile, Errol Anderson of Errol’s Commodity Wire out of Calgary suggested the loonie has already taken much of the hit since Trump first threatened the tariff shortly after he was elected in November.

“It’s actually a reflection of what’s going to happen to the U.S. dollar,” commented Anderson, suggesting the loonie is “very oversold” and the greenback is “very overbought.”

The loonie stood at 72.58 U.S. cents the day Trump was elected and since then it’s fallen to about 69.50, but it’s reclaimed about a tenth of a cent since the start of 2025. During the same period, the greenback was at 102.979 points on the U.S. Dollar Index, which contrasts that currency with six other major currencies including the loonie. By Jan. 16 the greenback climbed to 108.845, although it topped off at 109.812 a few days earlier.

“That’s slowing U.S. exports,” said Anderson, formerly the president of ProMarket Communications and a commodity broker with RJ O’Brien in Calgary.

He stressed the situation is more about what the U.S. dollar would do in the weeks and months ahead if Trump were to proceed with his tariff threat. He believes the U.S. economy has been in a recession despite it not yet showing up in official data.

“When their economy slows down, the U.S. dollar will come down. Then the loonie will actually go up,” explained Anderson, projecting the loonie could fall to 68 U.S. cents and then rise to as much as 72.

While the U.S. could find itself in a recession, the same would likely happen to Canada, said Sal Guatieri, senior economist and director of BMO Capital Markets.

“Retaliatory tariffs would only pile on the pain via higher prices for consumers and higher costs for businesses, undermining hopes of a revival in living standards and productivity,” Guatieri wrote in his North American outlook earlier this month.

“It’s how fast the Canadian economy can adapt,” stated Madhavji, noting such likely wouldn’t happen quickly.

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“It’s a pretty calm time of year. The feedlots are shipping a lot of fat cattle more than they are replacing. Their grain consumption drops off a little bit in February,” he said.

With nothing major happening that would get the feed grain market excited, there has been little to influence wheat and barley prices either way, he said.

Corn is in a somewhat different situation; imports from the U.S. have become more expensive as the Canadian dollar has been declining, he said.

The Canadian dollar was recently above the 76-U.S. cent mark and has lost about two-thirds of a cent so far this week. As of Thursday morning the loonie was at 75.27 U.S. cents.

Concerns of a global economic slowdown have been the root cause of declines on stock markets, according to media reports. In turn, those worries have weakened the loonie’s value.

Nevertheless, U.S. corn imports are expected to continue through the crop year, Pirness said.

“We’ll see what next year brings. It wouldn’t surprise me if we saw it continue into next year,” he said.

On the flipside, he added, a weaker dollar is supportive of Canadian exports.

— Glen Hallick writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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According to Farm Credit Canada’s chief agricultural economist, it’s also a situation farmers will likely have to deal with for at least the remainder of the year.

J.P. Gervais said he thinks farmers and agribusinesses will be able to manage the higher interest rates, but the higher dollar may prove more problematic.

During the past two to three years, he said, Canadian farmers have been shielded from a slowdown similar to what’s been happening in the U.S. farm sector, largely because a favourable exchange rate made selling exports based in U.S. dollars more profitable.

“Because I know given current pricing in the marketplace — and that’s across all sectors: grains, oilseeds, livestock — that a dollar at 85 cents is really a threshold or a point we’re starting to see margins getting a little bit of pressure,” he said.

The Canadian dollar was trading at US82.37 cents at noon Thursday, compared to US74.72 cents back on April 3.

For the time being, Gervais said, the dollar’s main influencing factor is no longer oil, but rather the spread between U.S. and Canadian interest rates.

“I think if you are looking at the spread between Canadian rates and the U.S. rates, I think for some terms we actually have higher rates in Canada than in the U.S. I think that’s consistent with a dollar around 82, maybe slightly higher than that.”

As long as the U.S. Federal Reserve holds its present course and doesn’t raise its interest rates, he said, the loonie’s strength relative to the U.S. greenback will continue. He expects it to last at least until the end of the year, he said.

The Bank of Canada yesterday raised the benchmark overnight lending rate to one per cent from 0.75 per cent. Gervais said he expects Canada’s central bank will not apply any further rate increases until it has time to assess the effects of the latest hike.

There may be some upside to the rising dollar, he said, in that input or equipment purchases priced in U.S. dollars will be more affordable for Canadian producers — but on the balance, a lower Canadian dollar is more important to the long-term health of the agricultural industry.

He added he doesn’t believe the higher interest rates will have a serious effect on farmers’ debt servicing, because that depends more on income than on assets.

If the dollar goes up again, however, and further cuts farmers’ margins, it could affect farmers’ ability to meet their debt obligations, he said.

Dan Mazier, president of Manitoba’s Keystone Agricultural Producers, said the dollar isn’t exceptionally high yet, but still will have an impact, especially because farmers entered the growing season with a much lower dollar in play.

“We’ve grown a crop, say, on a 75-cent dollar, and now we’re taking off a crop on an 82-cent dollar, and that’s a totally different scenario.”

Many of the crop decisions would have been based on a lower dollar and the higher-value exports that go along with that. Many of those plans will have to be reworked, he said.

Producers can take some actions to minimize the damage, he said, such as locking in basis levels or hedging dollars.

— Terry Fries writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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Out-of-country buyers tend to more attracted to Canadian grain and wheat when the loonie is low, as they can get more product for their money.

However, one market watcher pointed out the net benefit to Canadian farmers is really tied to where buyers are.

“It always comes back down to what other currencies are doing,” said Mike Jubinville of ProFarmer Canada.

Some countries, major grain exporters themselves, are also watching their currencies plummet relative to the U.S. dollar, he said.

So while the downward action of the loonie might appear to open up large trade windows for Canadian grain, those windows are still smaller than for countries in South America and the Black Sea region.

“The Russian ruble fell far faster than the Canadian dollar, so they’re in a more price-competitive position to compete in the offshore market, as are the Argentine farmers, Brazilian and Australian.”

Another analyst felt the loonie will see firmer ground soon.

“There’s going to be a rebound in the Canadian dollar and it’ll be when the U.S. dollar breaks down,” said Errol Anderson of ProMarket Communications in Calgary.

“The U.S. dollar, at some point, in my mind, will start to break down because the U.S. is at risk of recession.”

Commodity markets are full of emotion and fear right now, but eventually will make a solid push upward, he added.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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Even if the loonie stays weak in 2016, however, two analysts expect the upside potential it brings to agricultural commodity markets has mostly run out.

“Historically speaking, I have considered the effect of currency in determining price a secondary issue, but for 2015 I would say it’s been a primary issue — especially considering the rapid deterioration that we’ve had,” said Mike Jubinville of ProFarmer Canada.

A weak loonie has allowed Canadian grains and oilseeds to be priced more competitively in international markets throughout the year.

But even if the loonie stays low, Jubinville said, the direct impact to commodity prices has likely already been baked in. “I wouldn’t expect any significant price changes in agricultural commodities.”

That means the influencers at play in the new year will likely be wrapped around politics, weather and economic issues outside of currency markets.

A weaker loonie, however, still has the potential to drive up farmers’ costs of production. Fertilizer and machinery, which primarily come from the U.S., are more expensive because of the low Canadian dollar.

Jubinville said he expects the loonie to stay between US72 and 78 cents in the year ahead, but cautioned that currency markets are hard to predict.

A key U.S. Federal Reserve meeting on Wednesday (Dec. 16) is also a potential source of turbulence. Many analysts anticipate the Fed will raise interest rates, creating an even more bullish environment for the U.S. greenback.

“But I think the trade has already got that boost of interest factored into the current currency dynamics out there,” Jubinville said.

Whether the Canadian dollar will depreciate further in 2016 is heavily linked to what crude oil futures do.

Crude oil markets face a significant amount of uncertainty as the Organization of Petroleum Exporting Countries (OPEC) removed the ceiling on production, allowing an already oversupplied market to grow.

Ken Ball, a broker at PI Financial Corp., doesn’t think the loonie’s plight will be as dramatic in 2016. He said he thinks the dollar is near a low.

“I don’t think from here on out you’re really going to get the kind of movement that we’ve had the last couple of years.”

Ball agreed support from a weaker loonie to commodity markets won’t drive prices dramatically higher in 2016.

“It can still provide some support just by staying low, but perhaps we won’t get any new incremental support, at least not as much in 2016.”

The Canadian dollar fell this month to an 11 1/2-year low, sitting around US73 cents Tuesday, down from US86 cents a year ago and US94 cents a year and a half ago.

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow her at @jade_markus on Twitter.

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