EXCHANGERATECOMMENTS

The value of the U.S. dollar compared to another currency is the exchange rate. A change in exchange rate causes price adjustments for goods traded between two countries. In terms of U.S. exports, a higher exchange rate directly translates into higher costs for the buyer and usually a drop in tonnage sold. Also, a higher dollar tends to increase U.S. imports. †††

Exchange rates are driven by many economic forces and sometimes politics. Economically, they are largely the result of relative economic growth rates and the influence of monetary policy on interest rate differentials between countries. For U.S. meat sectors and livestock some key relationships include the Japanese yen, South Korean wan, Mexican peso, and Canadian dollar. During the first three months of 2014, exchange rates have been stable relative to all those countries. However, year-over-year the U.S. dollar has appreciated against the Australian dollar (16%), Japanese yen (11%), Canadian dollar (9%), and Mexican peso (5%); it only declined slightly versus the South Korean wan (down 1%). But, more than just the exchange rate influences international trade, so recent examples are apparent in the meat and livestock industries.

So far this year, the year-on-year changes in exchange rates have often been secondary to other factors, like Japanís changed rules regarding importing U.S. beef and Mexicoís need to animal based protein due to drought in recent years. Still, exchange rates are a factor; the most clear-cut example so far this year is probably U.S./Canada. As expected based on exchange rate changes from last year, so far this year U.S. meat tonnage sold to Canada has declined (beef, pork, and chicken) and imports mostly increased (beef and feeder cattle).