A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
politique monétaire américaine

The U.S. monetary policy gave U.S. agriculture a competitive advantage equivalent to 50 Airbus A380s in 2009

momagri Editorial Board

The debt crisis, which is still rife, has had a hard and lasting effect on many countries and though the international community may be mobilized on this issue, they are finding it difficult to find a clear and coordinated response. There is consequently an increase in interventionism which borders very closely on protectionism. The ongoing "currency wars" are an obvious sign. They reflect the priority for national revivals, even if at the same time, a consensus is emerging on the need to strengthen global governance.

It is in this sense that at recent G20 meetings, proposals were made to regulate financial and financialised markets. But the problem at hand is far from easy and resembles a giant puzzle because any decision in the field of financial market regulation will change the international competitiveness of many economic sectors.

This concerns agriculture first and foremost. If the exchange rate and monetary policies practiced by the various central banks have always had an impact on the export competitiveness of agricultural sectors, their influence has increased greatly since 2005. There are three reasons for this:
    - The rise in farmers resorting to debt along with the debt crisis gives the official market rates set by central banks greater importance;

    - The gradual liberalization of agricultural markets and the increase in the volumes traded means that exchange rates have a greater effect on the direction of trade flows;

    - Agricultural markets are subject to increasing financialisation1, making economic and financial variables key criteria for decision making, especially those related to debt such as official market rates.
Also, before regulating financial and financialised markets, it is essential to identify how the competitiveness of other economic sectors, particularly agriculture, is affected by changes in exchange rates or monetary policy.

A comparative analysis between the U.S. and the European Union was conducted by momagri© on this aspect2. It demonstrates that the undervaluation of the U.S. dollar against the Euro and the advantageous monetary policy practiced by the Fed have, since 2007, given an important competitive advantage to U.S. agriculture: 20.7 billion USD in 2008 and 14.5 billion USD in 2009, the equivalent of 50 Airbus A380s, just for the second year.

The undervaluation of the dollar against the Euro: indirect support for U.S. Farmers valued at 17.8 billion USD in 2008 and 14.4 billion in 2009.

The undervaluation of the U.S. dollar against the euro results in two main effects :
    - It curbs EU agricultural imports and stimulates U.S. agricultural exports;

    - It reduces the purchasing power of U.S. consumers for buying imported European agricultural products and thus tends to increase their purchases on the domestic market.
According to momagri© estimates, it emerges that the undervaluation of the dollar versus the Euro has resulted in a competitive advantage between 11.2 and 18.4 billion dollars for 2009, for a scenario median of 14.4 billion dollars (against 17.8 billion in 2008).

Lower real interest rates: a competitive edge of 2.9 billion in 2008 and 106 million USD in 2009 for U.S. farmers.

In making the cost of debt relatively lower compared to that of European farmers, the Fed policy has created a competitive advantage of 6.8 billion USD from 2004 to 2009 (2006 is the only year for which European monetary policy was more advantageous than American policies, with an advantage of 1.42 billion USD for European farmers).

The monetary and currency policy of the United States increased the competitiveness of U.S. agriculture in relation to European agriculture for an estimated 20.7 billion USD in 2008 and 14.5 billion USD in 2009.

This competitive advantage represented 5% of the value of U.S. agricultural production in 2009 (against 6.6% in 2008).

1 Financialisation is assessed by the increase in the recourse to debt financing by different market players. The valuation of various assets is then carried out mainly through the financial markets, which are increasingly more sensitive to the international economic context and the evolution of all types of economic indicators.
2This analysis performed during the elaboration of an indicator to measure the actual direct and indirect support to agriculture in the major producing countries, was conducted during a project for development of an agricultural rating agency.
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Paris, 11 December 2018