Wednesday, January 04, 2017

Impact of the 2015 U.S. dollar rise on export prices and on the agricultural industry

From the Bureau of Labor Statistics

U.S. export prices experienced a major decline in 2015, as evidenced by the Bureau of Labor Statistics (BLS) export price index. Prices for U.S. exports, published in dollar terms, decreased 6.6 percent in 2015, the largest calendar-year decline since the index was first published in 1983. However, the large decline in the U.S. dollar export price index did not tell the entire story. When measured in foreign currency terms, export prices were actually higher because of the strong dollar.

The value of the dollar strengthened against the euro, Japanese yen, Chinese yuan, and Canadian dollar. Continued slow global economic and trade growth dampened demand for U.S. exports and influenced U.S. export price trends. The meeting of the strong dollar and lackluster demand for U.S. exports was particularly challenging for the U.S. agricultural industry. This Beyond the Numbers article analyzes what impact the strengthening dollar had on certain agricultural commodities.

The foreign currency perspective
In 2015, the U.S. dollar rose nearly 12 percent over the currencies of the nation’s major global trading partners.1 From the perspective of foreign importers, the dollar’s appreciation increased the relative price of U.S. goods. For foreign buyers, the local-currency price of a U.S. product was more expensive.

The fallout for agricultural prices
Agricultural commodities are primary food products grown and raised on our nation’s farms, ranches and orchards. Agricultural exports decreased in value from $150 bilion in 2014 to $133 billion dollars in 2015—a decline of 9 percent. Because most primary agricultural commodities are traded in U.S. dollars the world demand for agricultural products are constrained by the value of the dollar.

In 2015, a dollar-driven drop in demand for U.S. agricultural goods was compounded by some commodities markets being flush with excess world supply that also put downward pressure on prices. These market conditions pushed the export price index of agricultural commodities down 12.9 percent in 2015. Grains and legumes (beans) and meat (beef, pork, and poultry) provide some of the key price stories of the year.4

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