The high value of the U.S. dollar in relationship to foreign currencies is affecting U.S. commodities on the global market, but industry representatives say it’s only part of the export puzzle.
The impact of a strong dollar is “huge,” said Ken Ballard, relationship manager with Northwest Farm Credit Services in Pasco, Wash.
When the dollar is up and foreign currencies are down, U.S. products are more expensive for buyers overseas. Commodities from competing countries with depressed markets are able to deliver at a price advantage to the United States, Ballard said.
Bulk commodities such as wheat, potatoes, hay, corn and soybeans, which rely more heavily on exports, are depressed, Ballard said. But apple varieties, aroma hops for craft brews and organic crops that cater to middle-class or higher incomes on the U.S. domestic market are performing well.
“The stuff that’s going for export is struggling, the stuff that’s staying home is doing better,” Ballard said.
The value of the dollar is only part of the bigger trade picture, says Vince Peterson, vice president of overseas operations for U.S. Wheat Associates.
He cited a “temporary” world surplus of wheat pushing competitors to sell at “below-market prices, certainly below U.S. wheat prices” and “low, almost free” freight rates and cheap oil for competitors as other factors impacting demand for wheat produced in the United States.
The biggest impact to demand is in price-sensitive markets in the Middle East and Africa.
More markets for U.S. potatoes were down than up in January 2016 compared to the same time last year, said Scott Sigman, vice president of trade and transportation with agriculture consulting firm Farmer, Lumpe and McClelland in Elmhurst, Ill.
“That strength of the dollar is having an effect,” Sigman said. “But quality and reliability of the U.S. source of supply helps buoy our exports, our agricultural producers and markets relative to other sources of supply or substitute product.”
Ballard isn’t certain how the dollar value will look moving forward. Europe, Canada and China are working to reduce the value of their currencies to make it easier to move goods and services globally, he said. The United States is not taking a similar approach, so the value of the dollar is going up, he said.
He expects more foreign competition on the domestic market if competitors have good production years.
If the dollar remains strong, it will continue pressure on agricultural commodities, Sigman said. U.S. companies will have to promote other values for their customers, emphasizing strengths where other parts of the world cannot compete.
Peterson pointed to record global demand for wheat in two of the last three years, with nothing in sight to stop the trend.
“We want to compete aggressively in the high-quality, high-value growth area and be prepared to supply other markets when other suppliers fall short, and that will happen again,” he said.