Strong dollar affecting US agricultural export

Amid a slowdown in global economic growth, a strengthening American dollar is having an adverse impact on US agricultural exports, which is estimated to decline by 17 per cent to $95.5 billion in the current fiscal, according to the US Department of Agriculture.     

The US' farm export had peaked at over $115 billion in the 2008 fiscal, spurred by macro-economic conditions including strong foreign growth and a weaker dollar, it said.     

"Exchange rate movements were a major factor underlying previous swings in US agricultural exports. The strengthening US dollar against competitor currencies will have a negative effect on US bulk agricultural exports," the USDA said.     

Total agricultural exports from the US, which is facing the worst financial turmoil of the post-World War II era, are estimated to decline by nearly 20 billion dollars to 95.5 billion dollars in the 2009 fiscal, it said.     

According to the USDA, bulk commodity exports in 2009 are likely to decline by 26 per cent and non-bulk products such as fresh horticultural products and processed foods are expected to fall by six per cent.     

"As long as global economic growth was sustained, prospects for US agricultural exports remained robust. However, the shift of export demand from developed to developing markets also brought greater vulnerability to market downturns," it noted.

Besides, the US agricultural sector faces heightened competition this year from large commodity exporters such as Canada, Brazil, Argentina and Australia as the US dollar has strengthened against their currencies, USDA said.     

It further said that due to erratic exchange rate movements, countries that primarily imports raw commodities from the US may search for the most competitive prices by shifting between suppliers.     

"Currently, reduced economic growth abroad, declining US consumer spending, and exchange rate movements are key forces guiding US agricultural trade. Now, prospects for US and global agricultural trade will clearly hinge on the resumption of global economic growth," USDA said.      

Despite the current downturn, world food demand would remain stable and demand for US exports is expected to recover as developing countries growth resumes in the longer term, it added.