Its often argued that the devaluing of our dollar (which strengthens the Euro) has had a major positive impact on the price of grains. Dollar gets cheaper = Euro gets stronger = grains go higher. Recently the dollar has been gaining strength and the Euro has been tumbling, so I wanted to look at how this relationship between the Euro and grains has been fairing:
The first chart shows the period between October 2010 and May 2, 2011. The Euro (Blue) rose nearly 15%, the Dollar (Green) declined by -11%. The basket of grains, represented by the iPath Grains ETN (Red line) rose by over 25%.
Now, since May 2, 2011 the Euro (blue) has reversed course and lost -12%, the Dollar (green) has risen by over 6.0% and Grains (Red) have dropped by over -25%.
So far, it looks like this relationship is holding up. In other words, is a strong Dollar, weak Euro going to be the straw that "breaks the farmers back"?
