The Weakening Dollar – Is It Good or Bad News for Farmers?

If you follow the financial news at all, you will have seen that after a period of relative strength, our dollar is now slipping back against a number of the other major international currencies.

The obvious question for many farmers is whether or not this is going to be a good or a bad thing?

The advantages

Having a weaker dollar means that many of our agricultural products are going to appear more attractively priced to our overseas export markets. That’s obviously going to help those farming concerns with a big export portfolio immensely because almost inevitably farm produce is very price sensitive.

It might also help a little in terms of our own domestic markets.

That’s because our own produce is going to look increasingly competitive when viewed against certain foreign imports. So, any farmers planning a foreign holiday might be disappointed because they’re going to find that the prices are rising but for many with export ambitions, the weakening dollar might well be both good news and a commercial opportunity.

The problems

There is, of course, a flip side to the above argument.

Anything we are purchase outside of the country and bring in as an import, notably agricultural machinery, is theoretically going to start becoming more expensive. The logic of that is pretty inexorable because clearly a dollar is going to buy less of the currency that the transaction is taking place in and which the, let’s say tractors, are priced in initially.

That also holds true for things such as a fertilisers or chemicals brought in from overseas – in fact anything that our industries aren’t producing domestically. More details please tarot one card lomamökit

The on-the-ground reality

A weaker dollar over the short to medium term isn’t necessarily likely to lead to a sudden crisis in escalating prices for imported items.

That’s because the importers of equipment and other farming products will very probably have purchased their existing stock back in the days when the dollar was stronger and that means that the domestic market will be insulated from potential currency-related price increases for a period of time. They may also have used a certain standard business facility, called forward currency contracts, to cover the risk of this very eventuality coming to pass (i.e. a weakening dollar).

If the situation continues into the medium to longer term though, there would appear to be a very high probability of things such as farming equipment increasing in price.

So, the obvious question arises as to just what this means for you?

If your markets are largely domestic then the advantages are likely to be relatively minor. By contrast, the disadvantages of a weakening dollar could potentially hit you hard if you are thinking about purchasing significant new capital items in the medium term, though that again assumes that the weaker currency becomes a trend.

In such a situation, it might be prudent for you to consider taking advice as to whether it would be sensible to purchase your equipment sooner rather than later while stocks of stronger-currency procured items remain in the dealerships.

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