Turns out Alberta honey is global business.
For Canada’s largest honey packer, Alberta Honey Producers Co-operative, getting the best foreign exchange rate means getting the best returns back to its members.
The Edmonton-based cooperative represents more than 100 beekeepers in Alberta (Canada’s most prolific honey producer), British Columbia and Saskatchewan, and has a sister co-op in Manitoba. Canada produces about 95 million pounds of honey a year and more than half of the delicacy comes from Alberta.
You’ve probably seen and tasted honey produced by the cooperative’s members, either at a local farmers’ market or on the grocery shelf, under the Bee Maid Honey Limited label. Their honey is also used in the food and beverage industry—from bakeries to breweries—to enhance flavours or as a natural preservative.
But while the honey itself is purely Canadian, many of the supplies beekeepers need come from abroad. Alberta Honey Producers Co-operative completes between $2 million and $10 million in business a year on behalf of their members with US and European suppliers. They buy queen bees from Hawaii, mite control from France and honey supers from the continental US. Getting a good foreign exchange rate is an important financial strategy for the cooperative when you look at those numbers.
Real time rates make for good business decisions.
During the busy retail season, around March to October, controller Darcy Sims, CPA, CGA, will check to see how the loonie is stacked against the US dollar and the euro for the best deal. She checks twice a day to see if the rates are favourable.
Using ATB’s online FX platform enables her to immediately take advantage of favourable exchange rates—which translates into managing costs more efficiently.
“The platform is timely and allows us to set up wire transfers to US suppliers, which is quicker, doesn’t take weeks to clear and can extend our payables period,” says Sims. “All that helps put money in the pockets of our members at the end of the day.”
Hedging to eliminate foreign exchange risk.
Canadian agriculture producers often buy equipment or supplies from the United States, Europe or Asia, usually placing an order months in advance of delivery. But if you buy a $50,000 US piece of equipment in equivalent Canadian dollars today, you might wind up paying more than expected on delivery because of rate fluctuations, notes Janek Guminski, Director of Foreign Exchange and Interest Rates at ATB.
That is where hedging comes in. By creating a contract for a specific dollar amount, exchange rate and range of dates for a transaction, producers can avoid price shocks. “Hedging allows you to have more price certainty by pre-buying the foreign currency at a set rate (which is not the same as buying today and putting the funds aside), freeing cash flow in the present and providing more certainty,” Guminski says.
It also works equally for sales to the US. “Say you’re selling a truckload of hay for $24,000 US, to be delivered in October and it’s worth $32,000 Canadian today. Are you going to get $31,000 Canadian or $33,000 Canadian? Losing that $1,000 could represent your margins,” he notes.
What influences the exchange rate anyway?
The exchange rate is driven by many things, but ultimately it’s driven by consumer sentiment, Guminski explains. People buy and sell speculating on the economy, retail sales, employment numbers, natural disasters and other uncertainties. What trips many up is the speed at which sentiment and the exchange rate can change.
The biggest mistake people make is not considering what their budget is for a particular trade, he says. “If my business thrives at the current rate, lock it in and move on,” he advises. Always looking for a better deal often means losing out as currencies can change course quickly.
ATB is here to help.
Knowing you’re able to draw on ATB’s expertise could help you understand and act on opportunities when they become available. And that’s what ATB is all about, providing ways for Alberta businesses to evolve and thrive.