In today’s edition, we look at a final flurry of cottage activity ahead of the capital-gains tax change next week, how candy makers are responding to the historically high price of cocoa, and a week of indicators that will paint a picture of Canada’s economic health.
The news now:
- Ottawa casts five-year deadline to end open-net salmon farms on B.C. coast.
- Ontario Teachers Insurance Plan restricts some patients to in-house pharmacy.
- ICYMI: How a crisis at TMU is rocking the Canadian legal world.
Capital-gains tax
Closing up the cottage
For cottage owners looking to sell, this week might not be so relaxing.benedek/iStockPhoto / Getty Images
The clock on the capital-gains tax change is ticking and cottage country is wilding.
Heather Scott, a real-estate broker born and raised in the Ontario area of Muskoka, said clients looking to move their properties are noticeably more motivated ahead of June 25 – when the amount they make from selling their cottages will be taxed more heavily.
While prices aren’t really budging, some sellers are getting creative. One client looking to move a $15-million property is offering a 2.5-per-cent commission plus a $200,000 bonus for a sale that closes before June 24. And another sold their family cottage to their neighbour in a private deal that came with a nice incentive: no mortgage payments for the first six months.
While some sellers are turning creative, Scott said many – especially on the higher range of earners – have decided to take a “wait-and-see approach.”
“They’re thinking, ‘maybe I should wait and hang on a little longer to see how things like the political landscape take shape.’ ”
If anything, she said, the effect will be felt more acutely by owners of “smaller, family cottages” who were counting on a bigger nest egg for themselves or their children.
The what, again?
The capital-gains tax. Simply put: A capital gain is the difference between the price you paid for an asset and the amount you sell it for. If you buy an asset for $10, for example, and sell it for $50, your capital gain is $40. Come tax time in Canada, that profit counts toward your income.
So, what changes? Right now, a maximum of 50 per cent of capital gains are taxable. On June 25, that number rises to 66 per cent for anyone reporting gains of more than $250,000.
Why are cottage owners upset? For anyone who had thoughts of selling their cottage as a central part of their retirement or estate planning, selling after that date means making a smaller sum than they were counting on.
THE SPOTLIGHT
A box of chocolates is a lot like life: increasingly expensive
The volatility around the cocoa market has driven chocolate prices to a world of pure imagination.Kirsty Wigglesworth/The Associated Press
Purveyors of chocolate bars, candy and other confections from around the world are convening in Buffalo today with a last-minute item added to their agenda: the soaring price of cocoa.
For members of Retail Confectioners International, a not-for-profit association founded in Chicago in 1917, this isn’t exactly their first candy crush. They’ve seen depressions, recessions, pandemics and supply-chain failures aplenty. But the convergence of global forces and investor unease that are driving up the price of cocoa are unlike anything the industry has seen. So while the convention will give them a chance to network – and even pay credit to caramel, this year’s rightful recipient of the Grand Confection Award – delegates will have serious issues to tackle.
Marc Johnstone, a member of the RCI and co-owner of Rheo Thomson Candies – a staple of Stratford, Ont., since the sixties – said his company is hopeful his customers recognize that maintaining quality will cost more if cocoa prices are higher. “It is my belief and hope that our customers will continue to pay for that quality, perhaps by purchasing fewer items.”
His company is planning to be in Buffalo today, and expects to learn more from major chocolate manufacturers about their plans so his business can anticipate what’s next. “It’s critical for my business, as consumers of chocolate, to pay attention to the rise and fall of cocoa but also to the wider business around it.”
The rise
The price of cocoa breached US$10,000 per tonne in recent days – more than double its price at the beginning of the year. That made it more expensive than copper, a bellwether for metals. It fell below that mark by the end of the week, but that only underscored its volatility.
The reason
A recent report from J.P. Morgan highlights a global supply shortage, deep-rooted structural issues and climate change-induced drought. All of which have been compounded by investor speculation, which “has now manifested in an investor-driven parabolic move in prices.” The most important driver, according to the International Cocoa Organization, is “the great uncertainty about the next crop year.”
The regions
The “next crop” refers largely to top growers in the West African countries of Ghana and the Ivory Coast – both of which had bad harvests this year that forced them to halt sales and exports. Production from countries outside Africa will take a couple of years to reach the market.
“The market is very short on beans, and it will not get better,” StoneX analyst Vladimir Zientek warned Reuters.
About my Oreo cookies: Mondelez International Inc., which makes Oreos and Toblerone bars, said it will try to keep its wares at affordable prices. Its CFO said the company anticipates an eventual decline in sky-high cocoa prices.
That would be good news to Canadians, who are spending more on chocolate and chocolate-adjacent products then ever before.
Canadian imports of chocolate (and what Statistics Canada calls “other food preparations containing cocoa”) have grown steadily over the past decade, to $1.75-billion from $1.04-billion in 2014.
Sweet.
Also on our radar this week:
Tuesday: Canadian job vacancies, first quarter.
Wednesday: Bank of Canada publishes summary of deliberations for June rate cut; quarterly population estimates in Canada.
Thursday: Employment insurance, April. New Housing Price Index.
Friday: Retail trade; travel between Canada and other countries.
Morning markets
Global shares steadied amid political turmoil in Europe, as investors look for direction from a string of central bank meetings in the region this week as well as fresh U.S. economic data and comments from Federal Reserve officials for more clarity on monetary policy.
Wall Street futures were mixed, with the Nasdaq climbing 0.1 per cent. TSX futures pointed lower after the market fell to a three-month low on Friday.
Overseas, the pan-European STOXX 600 was 0.16 per cent lower in morning trading. Britain’s FTSE 100 was down 0.24 per cent, Germany’s DAX rose 0.047 per cent and France’s CAC 40 added 0.17 per cent.
In Asia, Japan’s Nikkei dropped 1.83 per cent to 38,102.44, while Hong Kong’s Hang Seng closed 0.032 per cent lower at 17,936.12.
The Canadian dollar was trading at 72.79 U.S. cents.