Currency Values Hit Commodities

The rocky Asian stock markets of the past week bring no surprise to U.S. growers, who have watched the currencies of some of their largest export customers drop since July.

“This has been going on for quite a while,” said Tom Mick, executive director of the Washington Wheat Commission. The plummeting values of some countries’ currencies have taken their toll on the Hong Kong and Singapore stock markets, thus spreading the financial distress throughout Asia and beyond.

“As the South East Asian currencies are devalued, that limits their ability to buy wheat,” Mick said.

And that drives down prices in the U.S.

On the other hand, Monday’s drop in the U.S. stock markets may have shaken investors, but had little immediate effect on the region’s agricultural interests. The industry operates under a separate set of rules, Mick said.

What may happen is that some investors trying to escape the spiralling stock markets might put their money in commodities futures such as agriculture, he added.

Though agriculture prices won’t be immediately affected by the performance of the world’s stock markets, what happens to currencies here and abroad can ultimately hit growers deep in their wallets.

The currencies that have fallen the most significantly against the U.S. dollar are those of Thailand, Indonesia and Malaysia, all buyers of Northwest agriculture products, said Tom Shotzko, Washington State University economist. “That means our apples will be more expensive to their consumers.” And the region will export less. The Japanese yen, which lost 9 percent of its value against the U.S. dollar between Sept. 1996 and Sept. 1997, is also cause for concern, said Bret Fox, cattle research analyst with Denver-based Cattle-Fax.

Japan is the U.S. cattle producers’ biggest beef export customer and with the yen down, the Japanese importer is buying less beef.

Some analysts are saying the declines in foreign markets will shake U.S. agriculture returns.

“We are losing world markets that are critically important to our economy,” said Niki Glanz, a Seattle-based commodities broker for Columbia Futures Group. She added that she’s heard predictions that Japan’s yen will be the next to plummet.

But others say the drop in world markets is a phase that will soon pass.

“It shouldn’t have a long-term effect on consumer prices,” Fox said. “If this thing were to spiral into a general economic trend, we might see people buying less beef, but in general, I don’t expect to see anything changing.”

, DataTimes ILLUSTRATION: Photo