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US Dollar Hits 14-Year High / Mortgage Rates Continue Climb

December 22,2016-

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Wall Street may be celebrating the Trump Rally as stocks move higher.But all that bullish enthusiasm based on expectation for 2017- is translating into higher costs on Main Street now between higher oil prices, a dizzying run-up in interest rates and a markedly stronger dollar that is hurting our exports of goods and ag products, the places where everyday people work.

This week the 10-year note has exploded higher- up since the election from near 1.37% yield up to around 2.6%. Also this week the US dollar-index hit a 14-year high at 103, up 5% since the election. Mortgage rates zoomed from 3.5 percent on a 30-year from mid-November to 4.3 percent today while some are quoting 4.5. WTI oil has gone up to $53 a barrel from $44 in mid-November setting the stage for higher prices at the pump in coming weeks. Already US retail gasoline prices are up 27 cents from this time last year says Gas Buddy.

The super strong dollar is hurting US exports – key to profitability for the nation’s and California’s important ag sector. Trade is critical to U.S. farmers and ranchers. U.S. agricultural exports totaled $133 billion last year. That’s 23 percent of all U.S. ag production and 31 percent of the gross farm income for the nation’s 2.1 million farms, according to the American Farm Bureau Federation. In California ag products like almonds are mostly exported.

US ag exports reached a high in 2014 of $152.3 billion but have declined to $129.7 billion this year according to USDA. With the productivity of U.S. agriculture growing faster than domestic food and fiber demand, U.S. farmers and agricultural firms rely heavily on export markets to sustain prices and revenues.

The optimistic view is that demand will increase to offset our higher selling price.

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