Welcome to Agriculture Economic Tidbits, a weekly e-newsletter (emailed Mondays) for farmer and rancher members of Nebraska Farm Bureau. Agriculture Economics Tidbits will provide you with timely tidbits of economic information and policy analysis focused on Nebraska’s largest industry, agriculture, and its key players, Nebraska’s farmers and ranchers. The newsletter will break down global and national economic trends and what they mean for Nebraska agriculture, stay abreast of latest market movements, and provide the latest results from Farm Bureau research on current policy issues like property taxes, school funding, farm programs and international trade—all with the goal of helping you maintain a viable farming or ranching operation.
The question is often asked why the U.S. both imports and exports beef. Intuitively, it seems it would make more sense to neither import or export beef and have U.S. production supply U.S. demand. After all, imports and exports of beef as a share of production are roughly the same.
Not that confirmation was needed, but data released last week confirmed the U.S. economy is now in a COVID-19 induced recession. An economic recession is typically defined as two consecutive quarters of economic decline, generally measured by declines in gross domestic product (GDP).
Corn prices received by Nebraska producers are determined by global supply and demand conditions. A factor which influences both supply and demand is the value of the dollar. Figures 2 and 3 come from The Van Trump Report, distributed daily by Kevin Van Trump.
"The study of economy usually shows us that the best time for purchase was last year." Woody Allen.
The USDA Agricultural Marketing Service (AMS) issued a report last week with the sexy title, “Boxed Beef & Fed Cattle Price Spread Investigation Report.” Don’t let the titillating title distract (although it makes economists drool), the report undertakes a thorough examination of the price movements in the boxed beef and fed cattle markets following the fire at the Tyson facility in Holcomb last year and the COVID-19 outbreak this year.
Total support to agriculture averaged $619 billion per year between 2017-19 across both rich and emerging countries. This nugget of information comes from a report by the Organization for Economic Cooperation and Development (OECD), an organization of 37 rich countries, on agricultural policy in 54 countries across the globe.
When people think about technology and agriculture, thoughts typically turn to precision agriculture, variable rate technology, data gathering and analysis, genetics, or other technologies related to crop or livestock production. Few people would think of how technology might disrupt land markets. That has now changed.
“Alan Krueger, the late author of ‘Rockonomics’, an economist’s guide to the music industry, calculated that in America the biggest four promoters were responsible for more than two-thirds of concert revenues in 2017, up from less than a quarter in 1995.” Schumpeter: Raising live music from the dead, The Economist, June 27th, 2020.
Relations between the U.S. and China have grown increasingly edgy in recent months. Recent events in Hong Kong have contributed to the edginess. Hong Kong is an important market for U.S. beef. Figure 1, created by the Dept. of Agricultural Economics at Kansas State University shows that since 2014, U.S. beef exports to Hong Kong have exceeded 14 percent of total U.S. beef exports on a carcass weight basis.
The USDA June 30 crop acreage report surprised many in agriculture with a lower estimate of planted corn acres than expected. The reduced planted acreage sparked a rally in an otherwise dreary corn market. Unfortunately, the rally was short-lived as good growing conditions pushed prices lower again last week.
Figure 2. Percentage of World Economies in Recession
“Researchers at Harvard believe the rates of business closures are likely to be even higher. They estimated that nearly 110,000 small businesses across the country had decided to shut down permanently between early March and early May. It could take up to a year before government officials know the true toll. Small businesses account for 44% of all U.S. economic activity, according to the S.B.A., and closures on such an immense scale could devastate the country’s economic growth.” The Van Trump Report, July 15, 2020, Kevin Van Trump quoting a story from New York Times.
“Nothing is certain, except death and taxes.” This famous idiom is often attributed to Benjamin Franklin, but some people have also attributed it to Christopher Bullock or Edward Ward, also figures in the 1700s. Notwithstanding its source, for many Nebraskans the certainty of increasing property taxes is the most frustrating.
Every corn producer would love to know the harvest price for corn prior to harvest. Researchers at the University of Illinois have sought to give corn producers what they want by developing a statistical model to project the 2020 harvest price for corn. What does the model say? The harvest price will be $3.10 per bushel. And that’s a futures price, so the cash price is projected to be lower, perhaps below $3.00 per bushel.
“. . . China: home to 28% of the world’s manufacturing—nearly as much as America, Japan, and Germany combined—and, despite the coronavirus, is still going strong.” Chinese manufacturing: The world’s factory, The Economist, June 27th, 2020.
Tidbits will not be distributed next week due to the celebration of Independence Day and the signing of the Declaration of Independence 244 years ago. To read the Declaration go to: https://www.archives.gov/founding-docs/declaration-transcript. Please have an enjoyable celebration of America’s independence!
Agriculture’s deepening financial struggles were evident in the latest Ag Credit Survey conducted by the Kansas City Federal Reserve Bank. Each quarter the Bank surveys commercial banks in its seven-state region regarding credit conditions in agriculture, Nebraska included.
The June 22 crop progress report from the USDA National Agricultural Statistics Service (NASS) showed 96 percent of Nebraska’s wheat crop was headed. This means combines will be rolling soon in Nebraska’s “amber waves of grain”, if not already in some areas.
A new statewide initiative “The Combine” seeks to support high growth entrepreneurs in food and agriculture. The program, housed at Nebraska Innovation Campus, has a broad spectrum of sponsors and supporters including Invest Nebraska, Nebraska Farm Bureau, and Nebraska Corn Board.
“to assume the blessings and security of self-government . . . All eyes are opened or opening to the rights of man. The general spread of the light of science has already laid open to every view the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few, booted and spurred, ready to ride them legitimately by the grace of God. These are the grounds of hope for others; for ourselves, let the annual return to this day forever refresh our recollections of these rights, and an undiminished devotion to them.” Thomas Jefferson, declining an invitation to the Fourth of July celebration in 1826 in Washington D.C., quoted in: John Adams, David McCullough, Simon & Schuster, 2001.
The good news: beef and pork slaughter numbers have increased significantly over the past few weeks and have returned to levels seen pre-COVID and comparable to a year ago. The bad news: the backlog of animals to be processed remains, getting heavier each day.
Nebraska Farm Bureau and INTL FCStone Financial Inc. are hosting a free market outlook and educational webinar, Keeping the Nebraska Farm/Ranch Profitable in 2020.