The value of the U.S. dollar against other major currencies strengthened considerably in 2015, accelerating a trend that began in 2011, according to the U.S. Department of Agriculture’s Economic Research Service (ERS).
Through 2015, the dollar posted a total gain of 9.3%. While some gains against other global currencies were only slight, the dollar saw sharp gains versus Latin American currencies, gaining nearly 50% versus the Brazilian real and 16% against the Mexican peso.
The agricultural trade-weighted exchange rate is a broad measure of the value of the dollar against 79 foreign currencies, weighted by their share of U.S. agricultural exports. The dollar exchange rate affects the price of U.S. commodities in foreign markets, with a stronger dollar making U.S. products more expensive in terms of the local currency of importing countries. Conversely, a stronger dollar makes U.S. imports less expensive in dollar terms, ERS said. Since the dollar exchange rate affects the relative price of U.S. and foreign commodities in global markets, it can have important implications for agricultural trade.
"With the strengthening of the dollar in 2015, agricultural exports are expected to fall below 2014 levels, while imports are forecasted to increase,” ERS noted.
ERS exchange rate projections used for the “USDA Agricultural Projections to 2025” report (the current Agricultural Baseline) suggest that the dollar will continue to gain strength — but at a slower pace — in 2016 and 2017 before trending lower from 2018 through 2025.