Iowa Public Television

 

Weaker Dollar Boosts Wheat Exports

posted on October 29, 2004


The framework for renewed beef trade may have been established in Japan, but not so in other Asian nations that currently ban U.S. beef. Markets in China, Hong Kong and South Korea remain closed. And despite USDA announcements to the contrary, Taiwan says it has NOT made a decision on the resumption of trade.

There's also a political twist to the negotiations. Democrats, noting the tentative nature of the deal with Japan, accused the Bush administration of announcing a breakthrough to try and win votes in rural swing states. A source close to the negotiations told Dow Jones this week the charge was nonsense.

As critical, and as dicey, as negotiations are to the export-dependent farm economy, there are some fundamental factors also at play; among them, the value of a buck.

Weaker Dollar Boosts Wheat Exports From Geneva to Beijing to Tokyo, envoys working for the U.S. Trade Representative's office have been all over the globe in recent weeks trying to hammer out agreements on issues related to farm exports.

But diplomacy isn't the only path to increased farm trade. The dollar has been weaker in recent weeks against the currencies of America's major rivals in wheat production -- Australia, Canada and Europe. That makes U.S. wheat cheaper and more attractive to overseas buyers.

USDA, which had been calling for sharply reduced wheat exports in the current marketing year, recently upped its projections to an annual total of 975 million bushels. Analysts note that year-to-date export numbers for wheat are virtually the same as last year's, though foreign demand pushed export sales reported Thursday some 35 percent above the previous week.

Part of the reason for the strength of foreign currencies, especially the Australian and Canadian dollars, is those monies are commodity-based. Strong prices for metals and energy boosted the strength of those currencies and made Australian and Canadian grain more expensive on the world market.

The euro, too, has strengthened in recent weeks against the dollar, although at a much slower pace.

The upshot of increased wheat sales overseas has been a 20-cent jump in nearby wheat futures prices at the Chicago Board of Trade since the first of October.


Tags: agriculture crops markets news wheat