Naomi Blohm

Looking back at 2019, the value of the United States dollar has been in an ever so slight uptrend; unable to break below 95.00 and unable to climb above 100.00. The slight twists and turns along the way were tied specifically to trade deal gyrations with China, and U.S. economic news such as gross domestic product growth and interest rate cuts.

Traditionally, the U.S. dollar tends to be stronger when uncertainty rises in global economies. The U.S. dollar continues to be viewed as the safest investment overall. Increased trade tensions between Washington and China lends support to the dollar as many investors view the United States to be in a better position than other economies to withstand the trade war.

The reason you should monitor the value of the U.S. dollar is how it affects agricultural exports. When the value of the U.S. dollar is low, it makes it cheaper for other countries to import our products (due to currency exchange rates). U.S. farmers have commodities to sell—corn, soybeans, wheat, cattle, hogs, cotton and dairy products. An increase in exports leads to an increase in demand and potentially higher prices to be received by the farmer.

Where the dollar is headed in 2020 is of major question. Looking at a continuous monthly chart of the U.S. Dollar Index, 2020 trade outlook for the Dollar points to either a retest of the 2017 high near 104.00, or a slip back down toward the 2018 low near 88.00.

For the dollar to move lower we would have to we would need for world economies to see less “global economic uncertainty” in 2020. That could reduce demand for “safe havens,” and therefore weaken the value of the U.S. dollar. Or, if we see eventual trade negotiations between the U.S. and China, this would also decrease the demand for “safe havens,” which could also push the U.S. dollar lower in 2020. Most likely trade deal outcomes will affect the final breakout direction.

Editor’s note: Naomi Blohm is a marketing advisor with Total Farm Marketing by Stewart-Marketing and she is a regular contributor to the Iowa Public Television series “Market to Market.” She can be reached at naomi@totalfarmmarketing.com.

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