Will Weaker Dollar Benefit U.S. Wheat Exports?

By Tracy Sayler

Currency fluctuations can have an impact on trade competitiveness, and our George Washington is no exception: When the U.S. dollar weakens, it makes American-produced goods a better buy.

The U.S. dollar has weakened (or put another way, “gained in competitiveness”) about 20% against the Euro and about 25%-30% against the Australian and Canadian dollars in recent months.  Will this help boost U.S. wheat exports?

“It’ll certainly make us more competitive, but the impact of how much or how little it will help is difficult to measure,” says Mike Krueger, who, as a longtime market analyst with Agri-Mark and now The Money Farm, is no stranger to the mechanics of the grain trade.

Even with a weaker dollar, the U.S. will still be viewed in many ways as a supplier of last resort. “That’s due partly because of the other major suppliers—Canada and Australia—who are single desk sellers and can make whatever deals they want to make.” 

Krueger says where the weaker U.S. dollar could make an even larger impact is that the profitability of growing wheat for farmers in competing countries such as Australia and Canada is diminished.  “All of a sudden their returns on wheat are weaker. So while we may still be the supplier of last resort, it also means profits in other countries weaken as our dollar weakens.”

A database and information comparing the exchange rate for 80 countries, going back to 1970 and updated monthly, is maintained by USDA and can be found online: www.ers.usda.gov/Data/exchangerates .

Nominal Monthly Country Average Exchange Rates
(local currency per $US) 1998-2003

European Union

Australia

Japan