Impact on Trade
The Falling Dollar
Agricultural exports are at record --levels. Wheat and milk prices have spiked due to international demand for our now less expensive products. The prices of most agricultural commodities have increased due at least in part to increasing demand in the world marketplace. The dollar has fallen to historic lows against the euro, and the Canadian dollar is trading at par. The "weak" dollar seems to be an embarrassment to some—the United States is never weak! While there may be some political gain to be had from taking a stance against the weak dollar, some segments of the economy will gain from the fall of the dollar, and exporters of agricultural products will be among the primary beneficiaries.
And the really good news is that international demand is likely to continue to stay strong as long as the dollar remains weak. Of course, the rumor of a record wheat harvest in Australia will push down wheat prices significantly, and a record apple harvest in China will put downward pressure on apple juice concentrate prices in the world market. However, beyond normal supply fluctuations, the underlying economic conditions do not suggest a sudden strengthening of the dollar. Believe it or not, this is good news for Pacific Northwest fruit producers. Strong international demand will continue to strengthen our prices. Meeting that demand may be the biggest challenge.
Another aspect of the weak dollar that will help agriculture is that those "cheaper" imports are now more expensive. The cheap apples and asparagus from other countries are not so cheap anymore. U.S. agricultural products have become more competitive in the world marketplace because of the fall in the value of the dollar! This newfound competitiveness will help producers' profitability. Understanding the dynamics of the marketplace is as important, or maybe more important, to the bottom line as any production tweak.
Trade is exciting and will get even more exciting as the international marketplace continues to have a profound influence on U.S. markets and producers' bottom line.
On a personal note, this will be my last column. I will be leaving the IMPACT Center and Washington State University to lead the Agribusiness and Applied Economics Department at North Dakota State University. Thank you for the opportunity to provide my insights into the international arena and how it might affect the Pacific Northwest.