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RaboBank report looks at ag impact of strong dollar

Nicholson_Stephen

A new report from RaboBank looks at the appreciating U.S. dollar and its impact on ag exports.

Study author Steve Nicholson says the dollar has strengthened significantly in the past year.

“People in agriculture have been talking about this, particularly in the U.S. as we’re exporters of grains and oilseeds.  (there is) A lot of worry over what it means to U.S. agriculture, various commodities and what it means for other countries.  So we focused on all three of those things in the report.”

He says the report sheds light on the dollar being abnormally low from around 2008 to 2014, and the recent turn-around has to do with it being economically and politically stable.

In regard to competitive currencies, Nicholson tells Brownfield the report focused on the Brazilian real.

“We did that because it is kind of the easiest one for people to get a grasp on.  Brazil soybean production is front-and-center for U.S. producers and they’re really our biggest competitor.”

He says if you look at current soybean futures prices compared to last year’s harvest lows, U.S. producers have seen about a five percent increase in value.

“But if you convert that to reals per bushel, the Brazilian farmer has seen over a 50 percent increase in the value of his soybeans.”

Because of that, Nicholson says Brazil is looking at a four to six percent increase in soybean acreage this year, driving prices down even further.

“It’s sort of around-the-horn to think about what that’s going to do to prices.  The increase in production is going to move prices down, forcing the U.S. prices down and basis down too just to be competitive in the global market.”

Nicholson says the strong dollar is also hurting wheat exports, but for corn only 10 to 15 percent is sent out of country, so the impact isn’t as significant.

On the livestock side, he says it’s a little harder to figure out because of the many types of products and their quality. But overall, a strengthening dollar should be less detrimental to U.S. exports than for soybeans or wheat.

 

 

 

 

 

 

 

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