Canadian tree growers hit hard by weak dollar

The drooping value of the U.S. dollar means Canadian Christmas tree growers are seeing less green this season.

Canadian Christmas tree growers have seen their U.S. sales decline in recent years because of increasing costs and competition from U.S. growers. But it’s their own currency that’s causing them the most grief these days.

Compared with the U.S. greenback, the Canadian dollar is about 15% higher in value than it was the beginning of this year. Because tree growers are paid in U.S. dollars, their revenue is dropping by the same amount.

Canadian exporters of a wide variety of products including seafood, auto parts and Canadian Club whiskey are all in the same boat. But Christmas trees are an especially visible example at this time of year.

The situation is blamed for driving Canada’s largest Christmas tree grower, Nova Scotia’s Kirk Forest Products, out of business.

“That put the dagger to the heart,” said company founder Rick Kirk, who is shipping about 250,000 trees, most of them to the U.S., for the firm’s final holiday season.

The problems for Canadian Christmas tree growers began in 2002, about the same time the Canadian dollar began rising in value, growing about 50% since that year. More than half of Canada’s Christmas trees are shipped to the U.S.; that figure has dropped about 20% to about 2.1 million trees since 2002.

The effect on U.S. consumers is minimal because Canadian trees account for less than 10% of the total number of trees sold.

This season, the average price for a live Christmas tree in the U.S. is expected to be similar to last year’s average of $40.50, said Rick Dungey of the National Christmas Tree Assn. in Chesterfield, Mo.

Although the exchange rate is bad for Canadian exporters, it’s a boon for U.S. retailers because Canadians have been flocking across the border this month to shop.

Many people probably thought they had seen the peak last summer when the Canadian dollar -- called the loonie -- reached a 28-year high against the greenback. But the loonie’s value has continued to grow, reaching levels not seen since the Civil War 140 years ago, said Michael Woolfolk, senior currency strategist with the Bank of New York Mellon Corp. in New York.

The Canadian dollar surged to an all-time high of $1.10 against the greenback in November, a gain of 28% from Jan. 1, before falling a bit.

In dollars and cents, a Canadian grower who receives $20 U.S. for a tree would have pocketed $23.30 Canadian last December. This month, the same $20 U.S. per tree equals about $20.20 Canadian, a drop of about $3.

“It erases our profits, or very close,” said Larry Downey, president of the Canadian Christmas Tree Assn.

Some Canadian tree growers have protected themselves to some degree by entering into futures contracts that are based on currency. But for the rest, the only other choices are to ride it out and hope for better times -- or get out.

Although Kirk Forest Products is leaving the industry, many Canadian tree growers are staying in hopes of negotiating better contracts next year, said Tom Ernst, another grower in Mahone Bay, Nova Scotia.

Based on this season, however, Canadian growers can expect spirited competition when they start negotiating for Christmas 2008.