Speaking on Thursday at USDA’s Agricultural Outlook Forum in Arlington, Virginia, USDA Chief Economist Robert C. Johansson provided a broad outlook for U.S. agriculture. Today’s update provides an overview of key aspects of Dr. Johansson’s presentation.
On Thursday, the Federal Reserve Banks of Chicago and Kansas City each released updates regarding farm income, farmland values and agricultural credit conditions from the fourth quarter of 2017. The Federal Reserve Bank of St. Louis issued a similar update earlier this month. Today's update highlights core findings from the three reports.
Following the implementation of U.S. import tariffs on solar panels and washing machines, more recent news regarding potential executive branch trade barriers imposed on steel and aluminum imports have caused concern among some American agricultural groups. China is a leading producer of solar panels and steel, and is also a key export destination for U.S. agricultural exports. As U.S. farm income potentially languishes for another year, export markets have become increasingly important to the value of U.S. crop production. Some observers have cautioned that agricultural products could be targeted by China in retaliation for additional U.S. trade restrictions.
On Thursday, the U.S. Department of Agriculture released its 10-year projections for the food and agricultural sector. The report noted that, "Over the next several years, the agricultural sector continues to adjust to lower prices for most farm commodities. Planted acreage drops slightly despite continued low energy costs. However, marked shifts occur – most notably strong global demand for soybeans is expected to induce soybean plantings that exceed corn acreage. Lower feed costs and continued strong global demand provide economic incentives for expansion in the livestock sector." Today’s update highlights aspects of the report that focused on corn and soybeans.
On Monday, the Trump administration released its budget proposal for fiscal year 2019. Like last year, the budget outline contained proposed cuts to crop insurance and the SNAP program. Today's update looks at these budget ideas in greater detail.
A budget agreement reached last week included language that paves the way for cotton producers to participate in Title I commodity programs of the Farm Bill. After previous unsuccessful attempts to facilitate this change to the 2014 Farm Bill, the new provision allows cottonseed to be an eligible program commodity effective with the 2018 crop year.
The U.S. Department of Agriculture's Economic Research Service (ERS) indicated on Wednesday that, "Net farm income, a broad measure of profits, is forecast to decrease $4.3 billion (6.7 percent) to $59.5 billion in 2018, which would be the lowest level in nominal terms since 2006."
Secretary of Agriculture Sonny Perdue testified before the House Agriculture Committee on Tuesday morning at a hearing on the “State of the Rural Economy.” Recall that back in May, shortly after his confirmation, Sec. Perdue also provided lawmakers on the Committee with an update on rural economic issues. Trade issues with China and the ongoing renegotiation of the North American Free Trade Agreement (NAFTA) were among the key concerns that emerged on Tuesday.
An update on Friday from the Federal Reserve Bank of Kansas City ("Agricultural Lending Increases, As Do Interest Expenses for Farmers," by Cortney Cowley and John McCoy) stated that, "Lending at agricultural banks increased sharply in the fourth quarter, after appearing to stabilize in previous quarters. Large loans drove the increase in farm lending, which may heighten concerns about cash flow in 2018 as interest rates have continued to rise steadily."
Last week, a Bloomberg news article stated that, "Commodities would be particularly exposed if U.S. President Donald Trump’s decision to impose tariffs on foreign solar panels and washing machines sparks a tit-for-tat trade war with nations around the world...If China wanted to hit back, soybeans could be a weapon."