Death comes to us all. Life's but a walking shadow | If you check grain prices around the world and adjust for the various currency exchange rates you invariably find that the price is very close to the US price at the Gulf plus the freight differential. Essentially, the world price of grain is set in the US. If that's the case just how are they more competitive than us?
I think the question should be what are the factors that determine the exchange rates. What makes it more curious that I bet if you checked the exchange rates of our various competitors they all adjust in similar direction and amount. For example, at the moment the whole world is trying to begger us to keep themselves going. The easy answer is that we're the world's reserve currency (for all the good it does us) but that's a little too easy. For a short period China became the center of gravity of world demand and that seemed to take some of the pressure off us. As a consequence our exchange rate declined. Now that China's economy has slowed our demand has become prominant again. Our level of demand relative to the rest of the world was probably the consequence of the stimulus (we did QE, nobody else did). You wonder what would happen if the republicans take the White House, institute the budget cuts they promise and elect Fed officials that believe in a tight money policy. If they pushed the economy into a severe enough recession the exchange rate might just work more to Ag's favor. |
It's not the market
