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.
A key to risk management in cattle production is to be aware of the probabilities of price movements and make decisions accordingly. So said Dr. Elliott Dennis, a professor with the University of Nebraska Agricultural Economics Department, speaking to attendees at the Cow/Calf Symposium hosted by McPherson and Logan County Farm Bureaus last month.
“The economy is nothing without the words supporting it. Capitalism, like democracy, is talk, talk, talk, all the way down.”Deirdre McClosky, Bourgeois Dignity: Why Economics Can't Explain the Modern World, Vol. 2 of 3 of the trilogy "The Bourgeois Era," 2010, University of Chicago Press.
The weakened farm economy continues to be reflected in Chapter 12 farm bankruptcies. Bankruptcy court statistics show 38 farm bankruptcies were filed in Nebraska last year, 11 more than in 2018 (Figure 3).
Property taxes promise once again to be front and center in the Nebraska Legislature this year. One of the difficulties for Senators is to craft a balanced, responsive package to reduce property taxes when taxpayers have had vastly different experiences over the past decade.
Figure 1 shows the combined per bushel prices of corn, wheat, and soybeans since late 2011. It comes from The Heuber Report, provided daily by Dan Heuber, and provides an excellent perspective on commodity prices over the past decade.
“An analysis of Bureau of Labor Statistics data on the 569,419 businesses launched in March 1994 found that just 435,134 made it to the end of 1995, 257,488 lasted until 2000 and by the time it got to 2019, just 94,391 of the businesses were still kicking. That’s a 25-year survival rate of just 16.6 percent.” The Van Trump Report, 12.4.19.
China will return to the table as a significant buyer of U.S. agricultural goods under the Phase One trade agreement signed January 15. Chinese purchases of U.S. agricultural products averaged over $25 billion between 2014-2017 prior to the trade disruptions.
“Today, there’s a low-simmering Jacobin fever aimed at the so-called one percent. This bland description of economic elites is logically ludicrous, given that it is a fact of math that there will always be a top one percent.” Jonah Goldberg, Suicide of the West, 2018.
Last year was a struggle for agriculture on many fronts. Probabilities would suggest 2020 should be an improvement. Like every year, several drivers will influence the roads agriculture travels this year.
Reduced corn and soybean production in 2019 and a steady demand have provided underlying price support for crops heading into 2020. Markets are still heavy with supplies, but hawing trade relations and growing livestock production should help stimulate usage.
Cattle numbers in recent years have been increasing, but it appears the cycle is peaking. Last year saw the most cows sent to slaughter in any year since 2013, and a greater number of heifers were sent to feedlots, suggesting fewer producing cows on ranches this year.
The U.S. economy keeps puttering along like an old, used vehicle which just keeps running and running—not the sexiest vehicle on the road, but it gets the job done. The current economic expansion is now the longest in U.S. history.
This year should bring more certainty to U.S. trade relations with the rest of the world. The House of Representatives has passed the revised agreement with Canada and Mexico (USMCA) and the Senate is expected to pass it soon.
Election year politics can have undue influences on markets and economies. Add to this the President’s impending impeachment trial in the Senate and tensions in the Middle East and the political and international atmosphere will be especially charged in 2020.
As noted in last week’s edition, producers are increasingly turning to debt to finance their operations. Fortunately, with today’s interest rates, the interest costs on the debt are relatively low from a historical perspective.
“There are [U.S.] firms that rely heavily on China as a supply base and market, from Apple to General Motors, which sells more cars in China than in America.” China’s view of America, 440-pound rivals, The Economist, January 4th, 2020.
Last year was a doozy for Nebraska farmers and ranchers. Blizzards, floods, delayed planting, livestock death losses, a late harvest, trade disputes, and other out-of-the-ordinary events created production problems, management headaches, and higher costs.
The continued struggle to generate positive income has led to higher producer debt levels. Survey results from the Tenth District Federal Reserve Bank in Kansas City show loan renewals or extensions were higher than the previous year in the third quarter of last year.
Nebraska average land values since 1970 are plotted in Figure 3. After experiencing unprecedented growth between 2004 and 2014, when growth rates exceeded 10 percent in 9 out of 10 years, land values have cooled.