Deflation in US Dollar Coincides With Export Demand

DENVER, CO – As commodity prices began to rally in 2020, it coincided with a rapid deflation in the U.S. Dollar (USD), providing a major boost in exports according to a new report from the CoBank Knowledge Exchange Division. CoBank’s trade-weighted indices for selected agricultural sectors reflect a currency environment that is expected to be positive for some agricultural exports in the year ahead but is negative for others. While U.S. agricultural exports grew in 2020, commodities like grain, animal protein, and cotton experienced a modest currency headwind from ag exporting regions like South America and Eastern Europe, which is expected to continue in the new year. U.S. dairy products look to enjoy a more favorable foreign exchange outlook from currency strength in New Zealand and the EU, with U.S. tree nut exports expected to see tailwinds from stronger currencies in Australia and Iran. While foreign exchange rates may create headwinds or tailwinds for individual commodity markets, factors like weather, trade policy, and supply and demand fundamentals will continue to also be major drivers for trade.
(SOURCE: All Ag News)