Lets examine two critical components of the export market potential. First, one has to examine the health of our major trading partners. The top five trading partners in agriculture are Canada, Mexico, Japan, China and Germany.
The Canadian economy is doing quite well despite three blows: mad cow disease, SARS and the recent blackout.
South of the border, Mexico is a different story. The Mexican economy is now experiencing the impacts of globalization. Some of the businesses that have moved from the U.S. to Mexico are now moving from Mexico to China.
Japan, the world’s second largest economy, has been down for nearly 14 years. Recently, however, the economy has demonstrated some signs of growth, between 1 and 2 percent. This is good news, but it’s too early to declare a full recovery.
China is the red-hot economy of the world, growing above 5 percent annually. However in the coming month you will observe more pressure from global trading partners concerning currency valuation consistent with the rest of the world.
Germany‘s economy is struggling with high unemployment and the burden of costly social programs.
Now that we’ve taken a quick trip globally, let’s examine the second component that impacts export market potential: the strength of the dollar.
A strong dollar to the yen above 125 means slow exports for agriculture and manufacturing. However, this is good for consumer goods. As this ratio becomes 100 to one, more favorable trade occurs with our agricultural and manufacturing sectors. Currently the status is 112, which means a mediocre trading environment from a currency standpoint.
Side Bar A Delta Airlines executive just called me for a one-hour interview. Each top executive, 120 in number, is required to interview five of their most frequent flyers about customer service. What a novel idea! I hope they listen.
By the way, Delta has 90 million customers, and based upon the last decade of travel, I was in the top 7,200. Now that’s ugly!
My e-mail address is: sullylab@vt.edu
Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He recently completed a sabbatical working with the Royal Bank of Canada. He is now back at Virginia Tech with his academic appointment, which is teaching, extension, and applied research.
To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.
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