If you don't believe the global fac-
tors affecting the U.S. cattle market
are numerous and complicated, you
probably haven't heard Dan Basse,
president of Ag Resource Company,
give an economic outlook. His vi-
sion of the global marketplace of-
fered an interesting – and bearish
perspective – for agriculture. Basse
spoke to attendees at the Feeding
Quality Forum in August.
He said that a U.S. Dollar rally is
making waves in agriculture mar-
kets around the world.
"The Dollar has rallied some 23%
since last October. It's had a
tremendous impact on global agri-
culture," he said.
The big reason is that as we see
production expanding around the
world, the U.S. becomes less com-
petitive and needs to cut back pro-
duction. World demand for grain
and livestock is not growing at
nearly the same level it's been in
the last ten years.
Basse said there is no shortage
of grain in the world, so U.S. users
don't have much to worry about as
far as supply. U.S. grain producers,
however, need to concentrate on
making margin.
Despite being down 9%, U.S.
gross farm income is going to be
the fourth largest on record this
year, Basse said, but net farm in-
come will see the biggest drop
since 1932.
"Everything went higher as you
made more money," he said. "The
problem is now that the cycle has
changed, they are slow to take their
hands out of your pocket. Our bal-
ance sheets can't keep imploding
at this rate without some readjust-
ment in the cost side."
Land, labor, nitrogen and seed
have all risen dramatically.
"These are the four factors that
have to see readjustment if we are
going to see $3 corn prices trans-
late back to profitability for the
American farmer," Basse said.
The strength of the U.S. dollar
does not bode well for exports.
"We are only at the beginning of
year one-and-a-half of this dollar
rally," the analyst said, noting the
dollar typically rises in 6-year cy-
cles. "That means we are fighting
against others to export our goods
into the world marketplace."
Argentina, Russia and Brazil
have seen poor currency exchange
rates by comparison.
"This is really important be-
cause never before has the world
seen where the United States
wasn't a predominant exporter
10 FEED•LOT November 2015
STRONG
U.S. Dollar
Leads to Bearish Markets
MARKETING
B
Y MIRANDA REIMAN & JILL J. DUNKEL
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