Economists: No quick recovery for commodity prices, farm income
February 7, 2018
PHOENIX — Two prominent agricultural economists told the Crop Insurance Industry Convention on Feb. 6 that they do not predict a quick recovery of commodity prices or farm incomes.
Nathan Kaufmann of the Federal Reserve Bank of Kansas City said from 2007 — before the Great Recession — until 2013, agriculture "was doing really well" while the rest of economy was troubled.
Then commodity prices went down and "the downturn in agriculture has been gradual but persistent," Kaufmann said.
Now agriculture is being hit by small but gradual increases in interest rates at the same time more farmers are borrowing for operating expenses.
Some farmers keep producing despite low returns "just to keep going," Kaufmann said. Community banks also are suffering from a decline in deposits, he noted.
Patrick Westhoff of the Food and Agricultural Policy Research Institute at the University of Missouri said he does not see agriculture "in line for a big recovery any time soon."
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The two biggest drivers in demand for U.S. agriculture products have been the ethanol industry and China's imports of corn and soybeans, and Westhoff said he does not see growth in either demand in the near future.
China now imports 31 percent of the soybeans produced in the United States. China's use of corn has been rising, but so has Chinese corn production, he said.
Westhoff said he does not expect $5-per-bushel corn "anytime soon" unless there is a surprise.
A U.S. withdrawal from the North American Free Trade Agreement could affect sectors within agriculture differently, the economists said.
Kaufmann said if pre-NAFTA tariffs went back into effect, Mexico would have relatively low tariffs on grain, but higher tariffs on meat.
If Mexico began importing corn and soybeans from Brazil and Argentina, that would rearrange world trade patterns, with the United States seeking to find other markets, Westhoff said. But it would be a bigger problem for the United States if Mexico starts buying beef and poultry elsewhere, he added.
The low commodity prices have probably slowed the increase in farm acreage around the world, Westhoff said.