The halftime report on agriculture and the general economy is analogous to many of the starting players on a sports team being out with injuries and no return in sight due to the COVID-19 pandemic still looming.
For the most part, the government stimulus and other payments have filled some of the cash flow gaps created by demand destruction and processing interruptions in the U.S. and globally. Whether a producer or a household, these payments are most likely to be non-recurring. This means plans for 2021 and beyond need to be reassessed. A proactive planning approach could involve having plans A, B, C and D to provide added focus and direction in an uncertain economic environment.
Late this summer and fall, future regional outbreaks of coronavirus in the U.S. and other countries, specifically in the Southern Hemisphere, will need to be closely monitored. This will create extreme volatility in consumption and investment habits based upon behavioral economics and headlines.
The elections in the U.S. and other key countries around the globe will need to be on the radar screen. The results most likely will influence income and wealth taxes, regulations, and trade agreements, particularly in Europe and Asia. The unusual amount of stimulus infused into the economy around the globe will come with an economic and financial price, which can impact the value of the dollar and a country's competitiveness.
For those in the grain industry, and to some extent the livestock and protein sector, the economic health of the ethanol industry will need to be assessed. It appears that there is a concerted effort by Russia and the OPEC countries to drive ethanol and other alternative sources of energy out of business. If this were to occur, get ready for $100 per barrel oil and increased volatility. This will result in lower profits in agriculture and be detrimental to consumer confidence.
In the second half of 2020, some parts of the economy such as airlines, hotels, universities, sports and entertainment will operate at 50 to 75 percent of capacity. For most of the global economy, 90 percent capacity will be the benchmark. However, some will find the COVID-19 pandemic has positioned them to meet emerging needs and will operate at 125 percent of capacity.
The starting lineup of finance and economics has been startled. Hopefully, the bench players and the new draft picks can provide economic stability for the agriculture sector. Through it all, a sound business and game plan can provide the vision and focus for successful outcomes.