Is a strong dollar bad for US agriculture?

Abstract

AbstractUsing a panel of financial statements from 42,557 US farms over an 8‐year period for a total of 256,648 annual financial statements, this study examined the relationship between the US dollar and farm financial performance. Additionally, commodity prices, imports, exports, production inputs, and macroeconomic variables were also examined in relation to the financial performance of the agricultural community. Linear, logistic, and panel regressions, as well as Granger causality tests and impulse response simulations were all used to increase the robustness of the findings. It was found that farm financials were more likely to improve with an improving economy, strengthening dollar, and/or rising commodity prices. Also, as production increased, farm financials would be more likely to have weaker financial ratios. It was found that the US and world economies impacted the dollar, the dollar impacted prices, and prices impacted both production and exports. The findings are pertinent to not just farmers, forecasters, and commodity traders, but also financial institutions (i.e., Farm Credit Service Organizations) that now must build their own forecasting models under the new Financial Accounting Standards Board's current expected credit loss requirements. [EconLit citations: D01, G28, Q11]