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As farmers prepare to put in 2019 crops, trade and the government shutdown cause concern.

Government shutdown and trade troubles fuel concerns for farmers

Government shutdown, trade create anxiety for farmers

While prospects for a good start to a new farm year are generally high across Texas, thanks to beneficial rains in the fall and early winter, the government shutdown and trade concerns create anxiety.

As if low commodity prices weren’t enough, analysts are saying a December survey conducted by Chicago’s CME group in conjunction with Purdue University indicates their ongoing Index of Current Conditions among U.S. agricultural producers is substantially lower that it was a year earlier.

The Index was created to serve as a tool to measure how confident growers feel about the state of the industry and the immediate future for their farming and ranching operations.

Authors of the survey point out that rural property values have slipped slightly, many commodity prices continue to slump, and farm incomes are down, giving rise to concerns at a time when USDA is not fully functional or able to implement new farm legislation. Combined with trade concerns that continue to linger as talks between the U.S. and China fail to reach any meaningful agreement, worries over agriculture’s economy are commonplace across the industry.

On the bright side, if there is one, many farmers have expressed a degree of confidence in the near future, perhaps in part because they feel the industry has reached a low and the only way forward is up. But low corn and soybean prices, trade challenges and lingering problems for the U.S. dairy sector remain and weaken optimism for the new year.

Export worries

Iowa State University economists predict substantial challenges for America’s farmers and livestock industry as more and more producers rely on exports to make a living. But a prolonged stalemate with China over trade issues, despite a few positive developments in recent weeks, is one of the biggest stumbling blocks for farmers who rely on demand for U.S. ag products, especially from China.

Dr. Lee Schulz, at the Department of Economics at Iowa State University, says this is particularly true for livestock producers. He says as domestic consumption and demand for livestock products has declined, the only bright spot ahead would be a robust global market.

“I think it’s incredible that we’re seeing prices where they’re at today given the levels of production,” Schulz said at a stakeholders meeting at a recent Iowa State Outlook and Management conference. “As consumption of livestock products slows domestically, producers will have to rely on export customers to make ends meet, and this is particularly reflected in the hog market.”

Even as pork producers wait for Chinese tariffs on American pork to subside, Schulz says it looks like South Korea may start to pick up some of the slack. Korea went from fourth largest to third as a pork buyer in 2018, and Schulz hopes the trend will continue.

But it’s not just trade issues that have farmers talking. Until the federal government shutdown ends, farmers are expected to remain uneasy. Now 20 days into the shutdown, farm groups see few signs of plans to end it.

“Delayed payments, approvals and loans, as well as lack of reports. could pose problems for farmers,” reported Kent, Thiesse, farm management analyst.

Thiesse is the analyst and Vice President for Minnstrar Bank and a regular contributor to Farm Progress publications.

“As the shutdown continues, more federal government services that will be suspended or reduced are being identified, and several of those could impact farm operators and the agriculture industry,” he reported in Farm Progress’ The Farmer last week. “Local USDA Farm Service Agency (FSA) offices remained open during the first week of the government shutdown through December 28, 2018; however, they have been closed since that date.”

Those closures could delay another round of market facilitation payments (MFP) for federal tariff aide and possibly hinder rollout of USDA programs offered in the new farm bill.

FSA closures will also affect farmers’ ability to take out Commodity Credit Corporation (CCC) loans. CCC loan applications that were made by Dec. 21 were likely processed, but delays are expected on loans being processed after that date, which could significantly affect many producers.

Congress and the White House both say they will continue to seek an end to the shutdown, but with few positive signs of improving relations between the two branches of government in sight, analysts say the shutdown could continue in the week ahead, and possibly longer.

TAGS: Trade
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