Chief economist predicts ag growth, despite hurdles
ARLINGTON, Va. — Despite international trade disputes and difficult financial times for many farmers, Agriculture Department Chief Economist Robert Johansson this morning projected an expanding market for U.S. producers and more opportunities for them to grow and sell globally in the years ahead.
Johansson gave his agricultural economic and foreign trade speech this morning to open the USDA’s 95th annual Agricultural Outlook Forum, covering motivating factors in the current farm economy, the forecast for crops, livestock and trade, and the effects of the new farm bill.
Johansson acknowledged that questions about policy, trade, weather and market information are making the outlook less certain than it has been in years. “Will the incremental strengthening in commodity markets or recent optimism about the trade outlook carry over to the new crop year?” he asked.
While noting that the U.S. farm community is approaching record levels of debt, he said the debt-to-asset ratio remains low, and the national farm bankruptcy rate is 10 times lower than it was during the 1980s.
Questions about trade policy and market information will have an impact on what farmers are planning to do this year, he said, while production is growing faster than global demand. Soybean prices were going strong last summer, he noted, until China launched a 25 percent retaliatory tariff in response to President Donald Trump’s new tariffs. Soybean sales to other countries are up, he noted, but not enough to overcome the lost exports to China.
Johansson projected record-high meat and milk production in 2019, with milk prices expected to improve. The outbreak of African swine fever that China confirmed in August may affect global pork demand, he said.
“Several of our international commodity markets have been severely disrupted by the ongoing trade tariff situation,” he said, “even though sales to other countries, including Canada, Mexico and the EU [European Union], are projected to increase in 2019 and offset some of the reduction in exports to China.”
Still, he said USDA expects agricultural exports to grow over the next 10 years, even if retaliatory tariffs continue. But Johansson said a “proliferation” of new agreements among trading partners that exclude the United States will “result in other countries’ exports crowding out U.S. products without parallel or similar bilateral agreements with the United States.”
The new United States-Mexico-Canada trade agreement proposed to replace the existing North American Free Trade Agreement, which has yet to make its way through approval by Congress, should “help preserve and expand our access,” he said, as well as new negotiations with Japan, the EU and the United Kingdom, if and when it leaves the EU.
As the 2018 farm bill begins to be implemented, Johansson noted that the characteristics of U.S farm programs are changing over time, with crop insurance increasing in importance. And he said that while dairy was a focus of the new bill, the number of dairy herds continues to decline while individual herd size continues to grow, with the median herd size now at 900 cows.
In concluding his remarks, Johansson cited the need for innovation to provoke growth, and said improved food security around the world is seen as increased opportunity for U.S. agriculture.
“Ultimately, competition will motivate our producers to be more efficient and to innovate,” he said. “We expect more people to have improved access to food in the coming 10 years as real food prices fall and global growth continues to boost purchasing power.”
USDA’s “Commodity Outlooks” will be available online at 7 a.m. Friday. Click here to read it at that time.
–The Hagstrom Report
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