CoBank: Weak Dollar Benefits Commodities

The value of the U.S. dollar weakened substantially since March 2020 and is expected to experience modest deflation in 2021, making U.S. ag products more competitive globally. However, CoBank reports not all commodities are affected equally given the diversity in global export competition and foreign exchange rates. Fundamental factors like tariffs and weather conditions in key agricultural producing regions often dominate market dynamics despite currency impacts.

A CoBank researcher says, “some agricultural commodities like grains, oilseeds, and cotton will face a currency headwind.”  A CoBank index tracking commodities reveals that U.S. animal protein exports are expected to benefit from a modest tailwind fueled by a weaker U.S. dollar in 2021. The U.S. trade-weighted grain and oilseed index strengthened by 14 percent in 2020 and is expected to gain another four to five percent in 2021. Dairy products are expected to receive potential support from global factors. Finally, U.S. cotton faces headwinds from weaker foreign currency values in 2021, according to CoBank.