• • • Hedging the Canadian dollar
David Derwin, commodity portfolio manager with PI Financial, has been working with some of his farm clients for many years on currency hedging strategies as a risk management tool. Recently, he has helped bring these strategies into a package called the Currency Ag Strategic Hedging (CASH) program. This program helps protect farmers from a rising Canadian dollar while allowing the potential to take advantage of the upside when the dollar falls.
Any kind of hedging, on sales or currency, is basically a risk management tool. Canada is a net exporter of agricultural commodities, and many farmers are already hedging whether they realize it or not. “A lot of farmers will use deferred delivery contracts with elevators or minimum price contracts which is really just price insurance to help them protect their revenues and avoid risks,” says Derwin. Currency hedging is no different than hedging commodities, he says.
Anyone with obvious currency exposure is a candidate for currency hedging. Farmers in supply-managed sectors may not have the same currency risk because they serve a mainly domestic market. But a large grain farm with a lot of dollars on the line can feel currency fluctuations acutely. Anyone who feels that big movements in the currency could affect their bottom line is a good candidate for hedging.