(Bloomberg) — Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. President Donald Trump may have bewildered authorities in Argentina and Brazil by announcing on Twitter new steel tariffs as punishment for cheapening their currencies. But the measure does shine a light on how much the hardy dollar is hurting U.S. farmers.There’s little evidence those countries have intentionally brought down the value of their currencies; in fact, they’ve both been grappling to stop the rout, which is fueled largely by the relative strength of the U.S. economy.American corn isn’t impacted by U.S.-China trade tensions because the Asian nation doesn’t buy much of it. Still, U.S. corn exports are down 60% this marketing year mainly because the strong dollar is making it pricier for overseas buyers at a time when global competition is getting fiercer. Orange juice is another commodity caught in the currency cross-hairs.With the South American countries reaping bumper crops and Ukraine becoming more productive agriculturally, U.S. farmers are facing increasing global competition.If the trade war and tariffs “went away tomorrow, we’d still have a problem in U.S. agriculture, and that’s a strong dollar,” said Ann Duignan, a JPMorgan Chase & Co. analyst, in an interview with Bloomberg TV last week. “The reality of it is, the Chinese will buy at competitive prices, they’re not going to pay up for our commodities.”Meanwhile, both Brazil and Argentina have said they’re seeking to boost the value of their currency. Argentina’s peso plunged earlier this year after election results put a left-wing candidate in the presidency. Brazil has tried to prop up the falling real multiple times in the past month, with the devaluation causing havoc in some parts of the economy.Agriculture isn’t one of them. A weaker local currency has pushed up crop profits in the past few years, allowing South American growers to expand. At the same time, demand for Brazilian corn is surging as the spread of African swine fever helps fuel a protein boom.“Some Brazilian farmers say this was one of the best seasons in terms of profitability ever,” Tarso Veloso, an analyst at Chicago-based ARC Mercosul said. “That’s not because of Chicago prices.”–With assistance from Dominic Carey.To contact the reporters on this story: Lydia Mulvany in Chicago at [email protected];Marvin G. Perez in New York at [email protected];Tatiana Freitas in São Paulo at [email protected] contact the editors responsible for this story: James Attwood at [email protected], Reg GaleFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
