Impact Of Agriculture Output on Exchange Rates

Agriculture accounts for USD 547 billion (approximately) of international trade, which means 9.1% of world merchandise trade and it constitutes 40.9% of world exports in primary products.In the coming decades the agricultural sector faces many challenges stemming from growing global populations, land degradation, and loss of cropland to urbanization. Although food production has been able to keep pace with population growth on the global scale, there are serious regional deficits, and poverty related nutritional deficiencies affect close to a billion people globally. In this century climate change is one factor that could affect food production and availability in many parts of the world, particularly those most prone to drought and famine. Despite several decades of huge increases in the overall global food production, it is a fact that the gap in food security between the developed and the developing world is growing, and more and more people are suffering from starvation and malnutrition. The food supply must double to feed the world’s population in 2020.The United States is forecast to provide almost 60 percent of the cereal net imports of developing countries in 2020, the European Union about 16 percent, and Australia about 10 percent. Almost 80 million people are likely to be added to the world's population each year during the next 25 years, increasing world population by 35 percent from 5.7 billion in 1995 to 7.7 billion by 2020. More than 95 percent of the population increase is expected in developing countries, whose share of global population is projected to increase from 79 percent in 1995 to 84 percent in 2020.The increase in global food production needed to cover future demands has to be met primarily by productivity increases; an increase in cultivated area has limited potential, as arable land in many countries is already under pressure due to soil degradation (erosion, salinization), deforestation and desertification. Exchange rates are an important variable influencing the sale, purchase and competitiveness of products worldwide. While a stronger currency makes exports more expensive for other countries, it also reduces the cost of imported products for the home country. A weaker currency has the opposite effect, leading to increased exports and decreased imports.