CLEMSON, S.C. — Already feeling the pressure of drought, last year’s historic flood and low commodity prices, South Carolina’s number one industry could be pinched by an uptick in the value of the U.S. dollar, Clemson University agricultural economists say.
The value of the U.S. dollar against other currencies hit a 13-year high in mid-November, making U.S. goods more expensive abroad. Changes to federal trade policies and tariffs — particularly with China, a top importer of U.S. agricultural products — could hinder U.S. agricultural exports, as well, said Clemson University Extension farm business consultant Scott Mickey.
South Carolina exported more than $920 million in agricultural goods in 2014, according to the USDA.
“The dollar was at historic lows in 2012, ‘13 and ’14, so yes, it is a concern,” Mickey said at the S.C. Agriculture Outlook Conference in Columbia, in November. “If exports decline, farmers will be left with higher ending stocks.”
High ending stocks — the amount of product remaining after demand has been met — already have created downward pressure on the prices for cotton, corn, peanuts and other agricultural goods.
Nationally, corn yields are up 12 percent this year and are expected to hit a U.S. record, according to data from the USDA. Of around 15.2 billion bushels of corn produced in the U.S., an estimated 16 percent will exceed demand, leaving the market saturated with high ending stocks. That has futures prices sagging to $3.30 a bushel in the short term, down from around $3.60.
Some analysts expect growers to reduce corn acreage the next two years, Mickey said, and the need for livestock feed could heighten the demand for corn.
“So it looks like we have some upside potential, but remember, we’ve got high ending stocks,” he said. “An ending stock of 15 percent is too high.”
Soybean yields are also reaching record highs at nearly 4.4 billion bushels, an 11 percent jump from a year ago, according to the USDA’s latest crop production report. Strong exports pushed soybean prices above $10 a bushel in 2015, Mickey said.
Prices have since dropped but remain good at $9.20, he said. Again, high ending stocks are a concern, he noted. Ending stocks on soybeans increased 7 percentage points to 12 percent this year.
“I don’t see a whole lot of upside potential, but I didn’t see a whole lot upside last year either,” Mickey said. “The downside risk is stronger with soybeans.”
U.S. producers compete globally with South American soybean growers, he added.
“Watch the South American crop. If it’s good, U.S. soybean prices will drop,” Mickey said.