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 unknowns and uncertainties regarding the ultimate economic impacts of the COVID-19 outbreak on Nebraska agriculture remain. Everyday effects reveal themselves. As such, Tidbits will continue to offer updates on the influences of the pandemic on Nebraska agriculture as they unfold.
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.” Alexander Fraser Tytler, 18th century lawyer and writer, quoted by Cal Thomas, Tribune Content Agency, Lincoln Journal Star, April 1, 2020
Price movements and volatility over the past month for commodities have been striking. Figure 1, prepared by the Federal Reserve Bank in Kansas City, shows price changes and volatility indexes this year compared to last year for selected commodities and equity indexes.
“In 1918, a global pandemic killed 5% of the world’s population. 18 months later, the Roaring 20’s began. It seems inconceivable now but that’s actually what happened.” Downtown Josh Brown @ReformedBroker.
Investopedia defines a Black Swan as “an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.” The Black Swan has appeared in 2020 in the form of the coronavirus, or COVID-19. The ultimate impact to the economy, and the duration of the impacts from the outbreak and social distancing policy, are unknown. However, the economic realities of the situation to Nebraska agriculture are starting to become clearer.
If you need directions, ask someone who was raised in a rural area—that’s the finding of scientists in France and England. The Economist magazine reports that neuroscientists have found that persons who grow up in a city have reduced navigational skills compared to persons who grew up in rural settings.
“and that’s just not something that’s knowable, so actually writing down a forecast in that circumstance didn’t seem to be useful.’’ Federal Reserve Chairman Jerome Powell on the magnitude and duration of the COVID-19 outbreak and why the Federal Reserve will not be putting out its quarterly economic projections, although it expects to do so in June. A cruel paradox: Beating coronavirus likely means causing recession, by Paul Wiseman, AP Economics Writer, Omaha World Herald, March 22, 2020.
U.S exports of agricultural commodities of $137 billion in 2019, lagged exports in 2018 by 2 percent. Exports of Nebraska produced commodities showed mixed results, with red meat, wheat, and soybean exports higher last year compared to 2018, and corn, animal feeds (ddgs.) and hides and skins lagging. Figure 1 shows the percentage changes in U.S. export value of these commodities in 2019 compared to 2018.
Cattle imports from both Canada and Mexico were higher in 2019 according to the Daily Livestock Report. The U.S. purchases slaughter cattle from Canada and feeder cattle from Mexico. Imports of slaughter-ready cattle from Canada numbered almost 523,000 head last year, up from 417,000 head imported the year prior.
Data from the Association of Equipment Manufacturers (AEM) shows farm tractor sales in January improved almost 5 percent while sales of combines fell by 24 percent compared to January of 2019. Total sales of two-wheel-drive tractors grew during January by a total of 4.9 percent, while the total number of four-wheel-drive tractor sales fell 6.6 percent to 169 units sold. Sales of combines in January equaled 198 units, down from 262 units sold in January, 2019.
“Dear optimist, pessimist, and realist . . .While you were busy arguing about the glass of water, I drank it. Sincerely, The opportunist." The Van Trump Report.
The USDA’s most recent forecast of net farm income in 2020 pegs it at $96.7 billion, up 3.3 percent or $3.1 billion, from last year. If realized, 2020 would represent the fourth consecutive year of improved farm income. However, according to American Farm Bureau, 2020 farm income would only be slightly higher than the 20-year, inflation-adjusted, national average of $93 billion.
The Department of Agricultural Economics at the University of Nebraska-Lincoln released its crop budget estimates for the 2020 production year. The budgets include cost estimates for 15 crops, including 2 cover crops and reflect various production practices, materials and inputs, cropping rotations, irrigation practices, and options for weed management.
Walmart has moved down the food chain in the beef industry. In January, the nation’s largest grocer opened a case-ready beef processing plant in Georgia. According to Will Sawyer, lead economist with CoBank, the plant will prepare steaks and roasts for sale in 500 Walmart stores in the Southeast.
"I think the president of the United States matters less and more than people think. Less meaning a low number on a scale of one to 10, because the overall economy is moved by very big factors. In technology, in globalization, in developments in consumer tastes, and so on. But a president has more influence than people think in the sense of the very large regulatory and administrative state which report to the president.” Glen Hubbard, professor of finance and economics at Columbia University, Does the President Matter as Much as You Think? Freakonomics Radio, February 5, 2020.
Farmers have until March 16 to elect which farm programs will cover their 2019 and 2020 crops under the 2018 farm bill. The Agriculture Risk Coverage (ARC) and the Price Loss Coverage (PLC) programs fundamentally remain the same under the 2018 bill. However, the changes which were made, along with market fluctuations, necessitate that farmers take a fresh look at the programs for this sign-up.
Source: Daily Livestock Report, Steiner Consulting, Vol. 18, No. 30/ February 12, 2020. Forecasts reflect February WASDE update.
Source: Daily Livestock Report, Steiner Consulting, Vol. 18, No. 30/ February 12, 2020. Forecasts reflect December WASDE update.