In the News

By Paula Mohr

As the U.S. heads into an important year politically and economically for agriculture, a few bright spots attempt to shine amid the challenges of trade and price issues.

At Western AgCredit’s 2019 Strategic Planning Meeting Oct. 18 in Bryce Canyon, Utah, Dan Kowalski, vice president of CoBank’s Knowledge Exchange, gave an economic review and outlook. Main points of his presentation were:

-Global trade for the U.S. has nearly come to a halt, growing only 1% in 2019.

“This is concerning for 2020,” Kowalski said. Overall, the global economy is weakening in manufacturing, housing, industrials.

“These won’t get better until we get a handle on trade,” he added.

Trade tariff impacts on consumers are starting to show, too. Consumer spending had been doing well but recently has trailed off.

“The China tariffs are impacting consumers at about $1,000 per household,” Kowalski said.

Agriculture has been hit the hardest by the China trade dispute. Ag accounts for 80% of the decline in U.S. to China exports.

Overall, U.S. ag exports year-to-date are off 11%.

“Wheat and beef have done well but the rest [of ag products] are struggling,” he added. “The biggest risk we face is will we get those markets left?” Other countries are building up to meet the demand the U.S. cannot fulfill.

“China is making trade easier—just not the for U.S.,” he said. U.S. products are hit with an average tariff rate of 23% while other countries average around 6%.

-The U.S. economy has been in the longest growth period its ever had, from June 2009 to October 2019, yet it’s also the slowest annual growth rate as well at only 2.3%.

One positive, though, is the unemployment rate is down to 3.5%--a 50-year low.

“Job openings exceeded unemployment workers for over a year,” Kowalski said. However, some employers have reported that workers do not have some skills needed for those jobs.

A strong U.S. dollar is not helping either while the ag economy index is going down, he added.

-The beef cattle sector is still expanding but at a diminishing rate, he said. Exports have been excellent, yet he sees slaughter flattening out in 2020.

“It’s tough for cattle feeders as feeder prices are down in 2019,” he said, adding that they sould bounce back on slower expansion and solid demand.

-There may be opportunity for animal protein exports due to Asian Swine Flu. Consumers in China, the Philippines, South Korea and Vietnam have growing appetites for beef, pork and chicken protein. And those countries also are dealing with ASF.

-Dairy cow numbers in Utah are steady while cow numbers continue to climb in Idaho. Nationally, dairy cow slaughter between January-August this year was the highest in 30 years, driving down cull cow prices while propping up milk prices. The age-old question, though, is will dairy producers hold back from adding cows amidst better milk prices.

“Will there be self-control among dairy farmers?” he asked.

-U.S. hay market exports to China decreased when the tariff rose from 7% to 32%. However, U.S. hay has been heading to other markets, such as Saudi Arabia and the Middle East.

In Utah, a short hay crop in 2018 shrunk supplies and boosted prices. Plus, drought affecting most of the state continues to challenge hay and pasturelands.

-On the farm, producers are receiving farm cash receipts at the same level as 2011. Unfortunately, farm debt is going up and some are restructuring.

“The debt-to-income ratio of 4-5 times is a red flag to the farm economy,” he said, noting that farm debt increased ahead of the 1980s farm crisis.