These are stories Report on Business is following Thursday, April 2, 2015.
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What to expect in April budget
Canada's Finance Minister Joe Oliver promised today to unveil a balanced budget on April 21.
Mr. Oliver didn't give many details, The Globe and Mail's Bill Curry reports, other than to say it won't focus on cuts.
"We're looking at a budget that will be providing benefits to Canadians and encouraging more job growth," he said.
"We do not, however, need the kind of stimulus budget that we had during the great recession because we are not in a recession now, but we are going to continue to make investments in the future."
There's no question Mr. Oliver will unveil a balanced budget, said chief economist Craig Alexander of Toronto-Dominion Bank.
The question is how he does it in the wake of a weaker economic outlook and an oil shock that will weigh down corporate tax revenues.
"That creates a bit of a challenge for them," Mr. Alexander said in an interview.
There will probably be some spending restraint, the TD economist said, but the government will also need measures on the revenue side.
And that could take the form of asset sales, such as the General Motors Co. shares Ottawa owns, whose value is significant, Mr. Alexander added.
Indeed, today those common shares are worth about $2.7-billion (U.S.).
There won't be tax hikes, according to Mr. Alexander and others.
Here's what some other economists expect:
"The government has already delivered on its major promise, an income-splitting tax cut for parents. Now it's all about fitting in the spending levels to attain the other key plank, a balanced budget. The drop in oil prices and slower GDP growth will make that a somewhat tougher task, but the government could opt to trim or even drop the contingency reserve, and essentially spend it in advance on covering the disappointment in energy related revenues. For 2016/17, the projections will benefit from the consensus assumption that oil prices, and therefore nominal GDP growth, will be improving, giving a lift to the revenue assumptions for that year. So even if there's a need to penny pinch, in the budget, that will only be a one-year story. If there are new shiny baubles to be dangled in front of voters, they might be designed to kick in for 2016/17, when there will be more elbow room in the revenue base." Avery Shenfeld, CIBC World Markets
"We'll probably see a balanced budget given that impact of the slide in oil prices should roughly offset the $1.9-billion surplus estimated in the fall, plus the $3-billion contingency – and of course, a lot of political capital has been vested in balancing the books this year. But, that could mean little room for major new policy measures, at least ones that have a significant dollar amount attached to them in FY15/16." Robert Kavcic, BMO Nesbitt Burns
"A better-than-expected number for FY2014/15, with a surplus looking likely given the favourable year-to-date numbers. The stronger starting point bodes well for continued surpluses over the forecast period though we will likely see a lower surplus profile than was forecast in the fall statement as some of the funds will be put to work - debt reduction, tax relief and spending initiatives. The plan will continue to be based on prudent economic assumptions and maintain an adjustment for risk, suggesting any surprises to the plan will continue to be favourable." Craig Wright, Royal Bank of Canada
"Although the oil shock is a slight net negative, the diversified Canadian economy will allow the federal government to show a balanced budget in FY 2015-16 and beyond. Instead of having a new era of modest surpluses (like in the November 2014 mid-year update), the 2015 federal budget could show a streak of zero-deficits, unless there are changes in taxation or program spending … At the time of writing this 2015 federal budget, the economic/oil outlook was still highly uncertain. This is the biggest risk to the fiscal outlook … The exact timing and magnitude of the eventual rebound in oil prices and nominal GDP is unknown given the several possible scenarios that could play out in the global oil market. In turn, the various oil assumptions (WTI, WCS, CAD) used in the federal budget should be prudent, similar to what we've seen from the Alberta and Saskatchewan budgets." Sébastien Lavoie, Laurentian Bank
- Bill Curry: Oliver vows to table 'balanced budget' on April 21
- Video: Why provinces are rushing to tax the rich
- Provinces to snatch back the bulk of Ottawa's tax breaks: BMO
- In Ontario, it's taxing the rich. In Alberta, it's helping out
Canaccord chief dies at age 52
Paul Reynolds, chief executive officer of Canaccord Genuity Group Inc., has died following complications related to an incident while competing in a triathlon in Hawaii.
Canaccord's board announced Mr. Reynold's death this morning and said the company's chairman, David Kassie, is taking over as CEO immediately.
Mr. Reynolds was 52 and leaves a wife and four children, The Globe and Mail's Bertrand Marotte reports.
"As the architect of our firm's global transformation, Paul's distinct style of partnership, friendship and respect over three decades of commitment is just part of the legacy he leaves us all," Mr. Kassie said.
- Bertrand Marotte: Canaccord Genuity CEO Paul Reynolds dies from injuries suffered in triathlon
- Tim Kiladze in Streetwise (for subscribers): Paul Reynolds had Canaccord in his blood
TransCanada won't build Quebec terminal
TransCanada Corp. is abandoning plans to build an export terminal for its Energy East pipeline project at Cacouna, Que., a critical St. Lawrence River gathering place for beluga whales, but says it is considering alternative sites in the province.
The Calgary-based company also said it plans to have the pipeline in service by 2020, two years later than the previous target date of late 2018, The Globe and Mail's Bertrand Marotte writes.
TransCanada said today it made the decision because of concerns over the terminal's impact on the belugas, including a scientific report last December that recommended they be declared an endangered species with full protection of their habitat.
The proposed terminal and tanker-loading facility faced growing opposition from environmental groups and local residents.
CFTC accuses Kraft, Mondelez
Some of the most iconic names in the snack food business are at the heart of allegations of wheat price manipulation.
We're talking about brands like Oreo and Chips Ahoy cookies, Triscuit crackers and others.
Late yesterday, the Commodity Futures Trading Commission in the United States accused Kraft Foods Group Inc. and its former parent, Mondelez International Inc., of manipulating wheat prices a few years ago.
The CFTC sued the two companies in federal court, alleging this was done via purchases of some $90-million (U.S.) of futures.
No allegations have been proven in court.
"This case goes to the core of the CFTC's mission: protecting market participants and the public from manipulation and abusive practices that undermine the integrity of the derivatives markets," Aitan Goelman, the regulators enforcement chief, said in a statement announcing the lawsuit.
"A market participant who is not happy with cash prices available to it may not resort to manipulative trading strategies in an attempt to artificially lower that price."
This came before the breakup of Kraft Foods Inc., in 2012, into the two companies that exist today. And Kraft Foods, of course, is now being taken over by H.J. Heinz.
The CFTC alleges the companies bought six months' worth of wheat futures amid a rise in costs in 2011, but never planned to take delivery, the goal being a drop in prices on the cash market.
Kraft also held futures positions above the speculative limits, according to the complaint.
The profits, it alleges, amounted to some $5.4-million.
Kraft, the CFTC says, is one of America's biggest end users of No. 2 soft red winter wheat. It uses about 30 million bushels of wheat a year for products like Orea, Chips Ahoy, Ritz, Triscuit and Wheat Thins.
And the bulk of that wheat, generally sourced in Ohio, Indiana, Michigan and Ontario, is milled in Toledo.
In the summer of 2011, the CFTC alleges, wheat prices rose to $7.72 a bushel from $5.74.
"In developing the strategy, Kraft, acting through certain of its procurement staff and certain senior management, intended that the futures market would react to its enormous long position by increasing the price of the December 2011 futures contract while reducing the differential between the December futures price and the price of the cash market wheat," the document alleges.
"Kraft executed its plan, and the market reacted as Kraft expected, yielding Kraft more than $5.4-million in futures trading profits and savings from its strategy."
A Mondelez official was not immediately available to comment.
"While Kraft is named in the CFTC complaint, the transaction at issue occurred before our spinoff from Mondelēz International in October 2012, and it involved the business now owned and operated by Mondelēz or its affiliates," Kraft said in a statement.
"The CFTC complaint primarily focuses on the trading of wheat futures contracts in December 2011. More specifically, the type of wheat involved in the transaction is used in products such as cookies and crackers, which are not made by Kraft Foods Group."
It added it doesn't expect any material impact financially.
- CFTC allegations
- Video: New Kraft-Heinz giant has international aspirations
- Heinz to buy Kraft in deal backed by Tim Hortons' owner and Buffett
Trade deficit narrows
You've got to read a bit beneath the headline number to learn the state of Canadian trade, and what it means.
Canada's trade deficit narrowed in February to $984-million, from January's revised reading of $1.5-billion, as exports rose 0.4 per cent and imports fell 0.7 per cent, The Globe and Mail's David Parkinson reports.
But.
Export volumes slipped 3.3 per cent, according to Statistics Canada today, while prices climbed 3.9 per cent.
On the other side of the ledger, import volumes also fell, by 1.7 per cent, and prices rose 1.1 per cent.
Leading the export gains were those of energy products, which climbed by almost 15 per cent. Crude oil and bitumen rose 9.3 per cent, natural gas by 45.1 per cent, and refined products by more than 22 per cent.
But.
Energy prices gained 17.5 per cent, but volumes were still down, to the tune of 2.3 per cent.
"Canada's economy dipped in January, and the early news for February showed more of the same," said chief economist Avery Shenfeld of CIBC World Markets.
"Don't pay too much heed to the 'improvement' in the trade balance … as that came on falling activity in both directions."
- David Parkinson: Canada's trade deficit narrows on improving energy prices
- U.S. trade deficit lowest since 2009, ports dispute likely a factor
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ROB Insight (for subscribers)
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