Thursday, September 16, 2010

CAD dollar great for vacations – Not so great for freight!

Once again we are seeing a strong run by the Canadian dollar vs. the Greenback.  Just yesterday, we reached a six-week high as the world anticipates rising Canadian interest rates with the federal reserve staying the course.

While this may signal buying power for Canadian companies sourcing product in the U.S.; anyone in the freight business knows that a weak U.S. dollar will eventually bring imbalance to the southbound freight trade as our U.S. commercial customers wait for more favorable currency levels.

Bank of Canada chief Mark Carney stated recently that the economic recovery in Canada will be “slightly more gradual than expected” earlier this year and the central bank will be focusing on the “magnitude of the weakness in the U.S.” with regard to its monetary policy decisions.

What are logistics professionals to think?  It’s hard to say.  Higher inbound “spot market” freight rates may eventually offset any increased buying power companies find south of the border.  This reality sets in when Canadian customers find that the availability of Back-haul trucks from the US to Canada diminishes substantially with a weak U.S. dollar - which, in turn, inflates inbound freight spend. 

But what about all that stimulus money?  With the U.S. government contemplating another injection of stimulus money into the US economy it will be a wait-and-see story with respect to how financial markets balance increased U.S. debt and short term spending incentives.

Since we won’t be returning to the days of the 30% currency adjustment, Canadian exporters must focus on more efficient shipment consolidations to save money on every piece of outbound freight.   After you’ve mastered this then go and take a vacation – You’ve earned it…