You think grain exports are doing well...

The puny dollar has been excellent news for exporters and grains have been one big winner. But consider this commodity:

A ton of U.S. coal is so cheap at about $47 that European utilities will pay $50 to ship it across the Atlantic, according to Galbraith's Ltd., a 263-year-old London shipbroker. While oil and coal cost the same as recently as 1998, West Texas Intermediate crude is five times more expensive after climbing to a record $96.24 on Nov. 1.

Peabody Energy Corp., Consol Energy Inc. and Arch Coal Inc., the three biggest U.S. coal companies, forecast the largest increase in exports in 20 years, degrading the call for a moratorium on coal plants by former U.S. Vice President and this year's Nobel Peace Prize winner Al Gore. Coal use worldwide has grown 27 percent since 2002, three times faster than crude, said BP Plc. U.S. East Coast coal has risen 71 percent, while oil tripled on the New York Mercantile Exchange. [More]

The hunger for energy is still not viscerally acknowledged by most of us in the developed world. I think we would need a few weeks without power to grasp the importance. Any idea of constraining the demand in the developing world for electricity especially is naive at best - Nobel Prize not withstanding.

...there are 100 gigawatts of "illegal" electric power plants in China, meaning plants not approved by the central government. (The entire nation of France uses 80 gigawatts of power. China uses 650 gigawatts.) [More]

Absent a carbon tax or (poor second) emissions cap-and-trade schemes, emissions will continue to rise. And the brisk trade in coal can be the measure.

[Return to AgWeb]

Universal health care and a real currency?...

Those sneaky ol' Canadians have been using economic performance-enhancing potions, I guess. Take a look at the Canadian dollar (yeah, the one we used to laugh at 5 years ago).

Considering the hysteria that marks U.S. currency relationships with China and Japan, which stand accused of maintaining cheap currencies to boost exports, there should be widespread applause here for Canada. But as the Canadian dollar on Tuesday reached nearly a 30-year high against the U.S. dollar, trading at $1.07 Canadian per U.S. dollar, the Cassandras of international trade can't seem to find any words for our neighbors to the north. As far as I know, none of the financial pundits is saluting Canada's boon to U.S. exporters or, for that matter, complaining that the biggest U.S. trading partner is holding up U.S. consumers, who must pay more for Canadian goods. [More]

Most of my career producers near our northern border have been irked by the currency advantage that seemed to operate for Canadian competitors. Thanks to our huge appetite for Canadian energy, the gripes could be flowing the other way.

Deep inside we're all subsidy serfs...

It seems the competition from Chinese produce growers has tempted the US industry to turn to the Dark Side.

But now, in the face of tough new competition primarily from China, even these proud groups are buckling. Produce farmers, their hands newly outstretched, have joined forces for the first time, forming a lobby group intended to pressure politicians over the farm bill to be debated in Congress in January.

Sadly, it may not save them. But by using the power of California in Congress, they may just save us older recipients by diluting our payments.

Also, as the dollar continues to drop versus the yuan, what excuse will we use?

Weaker than what?...

While most of us in agriculture have been focused on commodity prices (well, our specific commodity price) other prices have been gyrating as well. For instance the price of a dollar.

And so it has. Against the euro, the dollar had been dropping, little by little, for more than a month before it broke through $1.30 on November 24th, going on to hit a 20-month low (see chart). Against the pound, on November 28th the greenback was at its weakest for two years. It slipped against the yen too, though it later made up the ground. Against the yuan—politically the most sensitive exchange rate these days—it continued a stately decline. [More]

Bad as it is to be playing second fiddle to a made-up currency like the euro, the steady rise of the yuan is the more interesting. We have been hounding China to let their currency appreciate, and now we've essentially done it for them with our slowing economy. Should the trend continue, money flows would change to counteract the effect.

Whether or not the greenback's decline persists, savvy investors can find plenty of ways to hedge against currency risk. The key is to maintain a globally well-diversified portfolio, experts say. Though the dollar may be falling, the sky is not. [More]

Back in the good ol' days, we'd just trot Big Al up to Capitol Hill to unleash a stream of cryptic quotes that the world would take for wisdom and faith in the greenback would miraculously reappear. Not so the with the new guy.

In the past few months, every time a policy maker found a waiting platform, he or she used the opportunity to remind us that the Fed is more concerned about rising inflation than slowing growth.

Their words had predictable results. The prices of interest- rate futures contracts that reflect expectations of Fed policy sank, wiping out the gains registered on weak economic data.

The gyrations have been large. The June Eurodollar futures contract rallied 43 basis points from 94.72 on Sept. 18 to 95.15 on Oct. 4. The gains were completely reversed over the next three weeks as various Fed officials -- Fed Governor Don Kohn and District Bank Presidents Michael Moskow (Chicago), Charles Plosser (Philadelphia), Richard Fisher (Dallas) and Jeffrey Lacker (Richmond) -- reiterated their concerns about inflation accelerating or failing to retreat from its current unacceptably high levels.

Then something strange happened. The market stopped listening.

But do we really care down on the farm if the dollar is weak? It depends on whose import is being gored. If you want to export grain or meat, you usually cheer as the dollar makes your products cheaper compared to competitors. But when you turn around to buy something with those cheaper dollars it gets problematic.

And one big thing we buy is energy. Oil, natural gas, and other imports cost more and this contributes to inflation. In fact, how much you buy and sell outside the country will determine which side you are rooting for. The tricky bit is if oil exporters decide to price in something other than dollars - like those pesky euros.

This would have a profound impact on our economy and our ability to control it within our own borders. As it is a falling dollar may force the Fed to raise rates even as the economy slows further. (It's really hard to tell cause from effect in this exercise, by the way).

We may be winning the corn price battle and losing the economic war.

Update (12/1) - Fortune magazine, presumably having read my post, agrees.