How the Dollar's Value Affects U.S. Farm Exports to Developing Countries. Foreign Agricultural Economic Report Number 237.

United States exports may not necessarily increase when the dollar falls on the world market. Conventional thinking is that a weaker dollar means more demand for U.S. products because they become less expensive than goods from countries with stronger currencies. However, developing countries whose export revenues are denominated in the weakening dollar can lose income because the weaker dollars they earn on their exported goods buy less on the world market. When the dollar slumps, therefore, U.S. farm product sales to some developing countries may also drop. An analysis of the effects of changes in currency exchange rates from 1980 to early 1987 on the capacity of 14 developing countries to buy imports showed that 7 of the 14 have seen a deterioration in import-buying power because of the dollar's drop since 1985. Four developing countries have shown modest improvements. The three top U.S. farm markets among the 14 developing countries--Korea, Taiwan, and Mexico--have not been affected by recent currency fluctuations. (Author/KC)