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Keep an Eye on the Strengthening Dollar

March 3, 2012
By: Sara Schafer, Farm Journal Media Business and Crops Editor
Flying Money


The economy is looking better and the U.S. dollar may be headed toward a long-term uptrend. Market expert Jerry Gulke explains what this means for agriculture.

With each passing day, you can find more signs of an improving economy, says Jerry Gulke, president of the Gulke Group. "The good news is our economy seems to be getting better and that’s good news for everybody."
Gulke says even with a large percentage of unemployed, more than 85% of Americans still have jobs and are eating and driving.
Overall, consumer attitudes are improving, as well as the automobile industry. "The money is out there to spend," he says.
Listen to Gulke's audio comments:



An Improving Dollar

Recently, the U.S. dollar has been weak compared to other countries. "Our dollar has been so cheap that it’s seemed to be that we’ve been on sale," Gulke says.
But that seems to be changing.
Gulke says the dollar ratcheted higher on Thursday with a key reversal up. On Friday, the dollar was up almost 60 points.
"We want a strong dollar for the economy so we can buy stuff cheaper and our cost of production is lower. "The dollar will probably strengthen over the long-term, especially compared to the Japanese yen." This comparison is important because Japan is a huge corn and soybean customer.
Of course, the downside to a strong dollar is our grain may not seem as inexpensive as it has been.
"What we don’t want to see happen is the stuff that we grow to become less attractive to others financially," he says. "We need to watch this like a hawk."


Impact on the Livestock Sector

Gulke says the jury is still out on how a stronger dollar affects the livestock market.The last cold storage report shows that lots of meat has been being stored.
"If you can’t sell high-price meats, you put it into boxes. You can store beef, turkey, pork and chicken just like we store grain. If the prices get too cheap, we store it and hope it’s going to go up again."
Right now, Gulke says we are storing a lot of meat because our exports have fallen. "We’re building up supplies. If you build up too much, you kind of have to have a fire sale. We’re keeping an eye on this right now."


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