A Dollar Crises for U.S. Commodities? A Look at What Is Driving U.S. Dollar Strength and The Impact on U.S. Agricultural Commodity Exports
Last week, the U.S. dollar reached a historical high against the euro, pound, and yen. When comparing the dollar to the currency of other agricultural commodity exporting countries like Australia, Brazil and Canada, there is a divergence, but the dollar is not at record levels.
Global geopolitical risks combined with the relative strength and stability of the U.S. economy and the current Fed policy are converging to influence the dollar’s performance.
The dollar’s strength creates substantial headwinds and has turned into a clear negative for U.S. futures and physical commodity exports. This price effect is particularly visible for commodities like corn, cotton, wheat and corn.
In contrast with the structural supply deficits affecting select U.S. agricultural commodities, we see the U.S. dollar creating short and medium term demand related challenges.