CoBank researchers say high interest rates and a strong dollar are a "one-two punch" that has taken a "disproportionate toll" on rural America's economy.
CoBank, which funds agriculture and rural businesses, said in a report on Wednesday that a stronger dollar hurts sectors such as agriculture by making U.S. exports less competitive. The Bloomberg Dollar Spot Index, which tracks the greenback's performance against a basket of 10 global currencies, rose to its highest level in nearly a year earlier this month.
"The double whammy of high borrowing costs and a strong dollar has hurt our export competitiveness, which has taken a disproportionate toll on rural industries such as agriculture, forest products, mining and manufacturing," the researchers, including Brian Cavey, Tanner Ehmke and Christina Pope, wrote in the report.
A strong dollar, coupled with export competition from global rivals, has reduced the appeal of U.S. grains. According to USDA export inspection data, total shipments of corn, soybeans and wheat so far in 2023 are down about 20 percent from the same period in 2022.
The CoBank report also shows that U.S. cotton production has declined, but rising interest rates and inflation have also weakened demand for U.S. exports and overall consumer interest; Us rice exports are likely to increase as CoBank expects India's export ban to remain in place until the May 2024 elections; The economic slowdown has had little impact on sugar demand, while drought in Louisiana and Texas has kept supply prospects bleak.