Falling Value of Dollar Helps Most Export Categories

DENVER, CO – The value of the U.S. dollar weakened substantially since last March and is expected to experience modest deflation in 2021. According to Tanner Ehmke, manager of CoBank’s Knowledge Exchange, a weaker dollar generally makes U.S. agricultural products more competitive on the global export market, but not all. Fundamental factors like tariffs and weather conditions in key agricultural producing regions often dominate market dynamics despite currency headwinds or tailwinds and should not be discounted, Ehmke outlines in a new report. After a challenging currency environment in 2020, U.S. animal protein exports are expected to benefit from a modest tailwind fueled by a weaker U.S. dollar in 2021. Both grain and oilseed exports should experience stronger demand in the new year due to China aggressive buying for feed as it rebuilds its hog herd, leveraging its strong currency relative to the U.S. dollar despite the dollar’s strength in relation to other currencies. The strengthening euro will raise the cost to bring butter and cheese into the U.S., potentially supporting domestic demand for U.S. dairy products. Cotton is heavily dependent on exports with more than 80 percent of U.S. cotton moving into the export market, commanding roughly a 33 percent share of all global exports. The continued weakness in the Brazilian real is expected to provide a strong headwind for American farmers as the world’s second leading exporter picks up market share in China, Vietnam and Pakistan.
(SOURCE: All Ag News)