billybob - 10/6/2009 07:06 Interesting. It is apples and oranges to a degree. Yes, what farmes buy may be still made in America, but the builders of what we buy may be buying what they need from outside of America. Would this not affect what farmers need to buy? Yes, the value of the dollar certainly influences some inputs. My point above is that most of them are related more to the value of oil (which of course is also related to the value of the dollar), but in this case oil would be a better hedge than dollars or soybeans. Earlier post pointed out the the dollar was once at 88-89 earlier this year and now it is at 77 or so. That is an appox. 12.5% decrease in the buying power of the dollar to other parts of the world. It has not yet been a whole year since it started at 88-89 and may go down more. So if it held at 77 would we not have an inflation rate on world purchased goods of 12.5% that in part would be pasted on to the consumer? As the dollar decreases world purchased goods (commodities at least) will increase in price. It is not however a direct relationship like you suggest. The US is one of the largest purchasers of many commodities, and therefore will influence the price. If the price of a good in US dollars rises, US consumers will demand less of it (how much depends on the price elasticity of demand) which reduces the world price of the good. So in your example, if the USD declines by 12.5%, the price of a world good in USD may only rise by 10% or so. Now add in that supply can be controlled for some commodities like crude, that the OP's article points out has traditionally been priced in USD, and it muddies the waters even more. I don't get to excited about it because I can not change what is happening. I guess I could go out and buy some foriegn currency, but that is not me. Safe and steady as we go. Yes, I just need to do the best job of marketing my grain as possible and not let the dollar value change affect my marketing. I think you would be wise to keep the dollar's value in mind when marketing your grain, but I also don't think one should seek to store wealth in grain. One interesting part of all of this is the the Chinese for a time were doing what the OP suggested, buying commodities like crazy, likely as a hedge against the dollar. I think this was a part of the big run up in prices. Of course a huge holder of USD like the Chinese can't just hedge them off in the futures markets like we can on an individual farm. At some point though the warehouses get full when using physical commodities, you just can't keep buying. |