Why Are Agricultural Investments Hurt by the Strong Dollar

By
www.ProfitableInvestingTips.com


There is pain in farm country this year. The weather
was awful. China quit buying soybeans. And, now corn
exports are down substantially. The strong dollar is to
blame in the latter case. Why are agricultural
investments hurt by the strong dollar?
https://profitableinvestingtips.com/profitable-
investing-tips/why-are-agriculture-investments-hurt-
by-the-strong-dollar


Why Are Agriculture Investments Hurt by the Strong
Dollar?
The other day President Trump chose to restore tariffs
on steel from Brazil and Argentina according to the
BBC. He did this to punish the two countries for having
weakening currencies. The weaker currencies make
their agricultural exports more competitive. And, that
has reduced U.S. agricultural exports.


 US President Donald Trump has said he will place tariffs
on steel and aluminium imports from Brazil and
Argentina.
 He justified the move saying those countries' weak
currencies had made it harder for US food exports to
compete.


 "Brazil and Argentina have been presiding over a massive
devaluation of their currencies, which is not good for our
farmers," Mr Trump said.
 Brazil's President Jair Bolsonaro said he would seek talks
with Mr Trump.


 "Their economy is not comparable with ours, it's many
times bigger. I don't see this as retaliation," Mr Bolsonaro
said in a radio interview with Brazil's Radio Itatiaia.
 "I'm going to call him so that he doesn't penalise us. Our
economy basically comes from commodities, it's what
we've got," he said.


The culprit does not seem to be intentional devaluation
by either Brazil or Argentina but rather the U.S.
economy and strong U.S. dollar.


 Bloomberg looks at the same issue in their article
about the real foe for U.S. farmers.
 President Donald Trump may have bewildered authorities
in Argentina and Brazil by announcing on Twitter new
steel tariffs as punishment for cheapening their currencies.
But the measure does shine a light on how much the hardy
dollar is hurting U.S. farmers.


There’s little evidence those countries have intentionally
brought down the value of their currencies; in fact, they’ve
both been grappling to stop the rout, which is fueled largely
by the relative strength of the U.S. economy.


 As they note, corn exports by U.S. agriculture are
60% lower this year because buyers can purchase the
same quality corn for less from countries with
weaker currencies. Orange juice is another
commodity that is suffering as well.
 Meanwhile, countries like Ukraine, Brazil, and
Argentina are producing more and, due to weaker
currencies, able to export for less.


 U.S. Agriculture Needs Foreign Markets
 We wrote some time back about how the trade war is
hurting U.S. agriculture. In that case, we focused on
how North Dakota farmers and the agriculture
infrastructure had geared up to ship soybeans to
China. But, soybeans are only part of the picture
with U.S. agriculture. According to the USDA,
agricultural exports in 2018 were about $140 billion.
The leading exports are “grains/feeds, soybeans,
livestock products, and horticultural products.”


 horticultural products.”
 Again, according to the USDA, in most years 50% of
US soybeans are exported, 46% of wheat, 21% of
corn, 55% of rice, and 76% of cotton. Overall, 20% of
US agricultural production is exported. As a whole,
U.S. agriculture is the largest US exporter.
 In a nation that has to worry about its balance of
payments, a healthy farm economy is a big deal.
And, right now the strong US dollar is causing a lot
of pain.


For more insights and useful information about
investments and investing, visit
www.ProfitableInvestingTips.com.

Why Are Agricultural Investments Hurt by the Strong Dollar

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Why Are Agricultural Investments Hurt by the Strong Dollar