The U.S. dollar index sank to four-year lows this week after President Donald Trump said he was comfortable with the depreciation of the U.S. currency because it’s “good for American businesses.”
Treasury Secretary Scott Bessent, appearing on CNBC, tried to walk back the president’s comments to stabilize the currency saying, “The U.S. always has a strong-dollar policy.”
Weak Dollar Translates Into Increased Exports
Alan Brugler with A&N Economics Inc. says Trump’s goal when he took office was to erase the U.S. trade deficit. Tariffs have been part of the strategy, but to increase exports it also helps to have a cheaper currency. He says that has been evident in strong export sales totals the last few weeks, especially for corn.
So, the four-year lows in the dollar are good for agriculture, according to Brugler.
“What we’re seeing right now is, I think, intentional — that is, to get a little weaker dollar and, of course, that does help commodities in general,” he says. “If you have a weaker dollar, you get get more exports. You also get, just by definition, if the dollar is weaker, it takes more dollars to buy the same amount of value. So, that that bushel of soybeans or, you know, that steer are worth more in dollar terms if the dollar’s weaker.”
Lower Dollar and Inflation Fears
Ted Seifried with Zaner Ag Hedge says the lower dollar is also fueling talk about renewing inflation.
“The Fed leaving rates unchanged shows that they’re concerned about inflation as well,” he says. “And so I think there’s been a lot of talk about money being reallocated to commodities. And generally speaking, that’s a commoditywide thing. So, the grain markets are finding some strength in that.”
Lower Dollar Could Bring Fund Money Into Grain Markets
Fund managers have also been buying precious metals and pushing those to record highs to offset the devaluation of the dollar. However, Brugler says that position is getting overextended, and so the funds have been buying grains to diversify.
“If you’re buying gold and silver because of the debasement argument that the currency is going to be weaker, maybe this is the opportunity to start buying what look to be undervalued assets here as we go into the end of January,” he explains.
Grains Look Undervalued
With grain prices at multiyear lows, that is one commodity that is undervalued.
“Yeah. Soybeans definitely fit the bill on an inflation adjusted basis. Corn is is very cheap,” Brugler says. “And wheat near five bucks or thereabouts, that’s a nine-year cycle low.”
Will Grains See Additional Speculative Buying?
So, will the speculators and money managers keep buying grains, and could this finally be the catalyst to produce a sustained rally in the grain markets?
Brugler is optimistic.
“I think you could definitely see some more fund buying,” he says. “Again, you’ve got the weak dollar, which says commodity prices in general ought to go up. You’ve also got a need for diversification.”
The currency devaluation is also stimulating other agricultural exports as pork sales came in at a whopping 56,000 metric tons this week, with China being 16,000 metric tons of that business.
