FarmPolicy

July 15, 2019

Ag Economy: Ag Committee Hearing, and USDA Reports

On Wednesday, the House Agriculture Committee will hold a hearing on the state of the Rural Economy.

Chairman K. Michael Conaway (R., Tex.) indicated that, “Against the backdrop of deteriorating conditions in farm country, Secretary of Agriculture Tom Vilsack will testify on the state of the rural economy. This hearing will examine the extent to which current farm policy is helping address the estimated 56 percent decline in net farm income since 2013, the largest 3-year percentage drop since the Great Depression.”

For additional background on the difficult economic circumstances currently impacting the farm economy, see this outlook from January, as well as reports on land values and income from the St. Louis and Kansas City Federal Reserve Districts, and the Chicago and Dallas Fed Districts.

Additional reporting on the ag economy, and the impacts of lower commodity prices, have recently appeared in The Financial Times.

And Bob Tita reported in today’s Wall Street Journal that, “Deere & Co. trimmed its sales and profit forecast for 2016 as it continues to trudge through the worst slump in U.S. farm machinery demand in 15 years.”

The Journal article noted that, “After an extended stretch of elevated demand for farm equipment that was aided by U.S. tax breaks for equipment investments, farmers have scaled back their purchases as lower prices for corn, soybeans and other commodities squeeze farmers’ incomes.”

Charley Grant pointed out yesterday at the Journal’s MoneyBeat blog that, “Deere’s financial outlook gave no sign that the downturn in the global farm economy is letting up.”

Mario Parker and Shruti Singh reported yesterday at Bloomberg that, “Farm income is suffering as an oversupply of crops and meat depresses prices for agricultural commodities and farmland. Nebraska’s Creighton University said Thursday that about 37 percent of Midwest and Great Plains bank chiefs who participated in a survey saw their local economy in recession.”

The Creighton report also quoted Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business, as saying: “The strong U.S. dollar and global economic weakness have pushed grain prices down by 11 percent and slaughter cattle prices are 22 percent lower over the past 12 months. These weaker prices have discouraged farmers from buying additional agriculture equipment and have negatively affected the agriculture equipment dealers and manufacturers in the region.”

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Meanwhile, in its monthly Cattle on Feed report yesterday, USDA’s National Agricultural Statistics Service (NASS) stated that, “Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.7 million head on February 1, 2016. The inventory was slightly below February 1, 2015.”

Also yesterday, NASS indicated in its monthly Milk Production report that, “Milk production in the 23 major States during January totaled 16.6 billion pounds, up 0.3 percent from January 2015.”

The report added that, “The average number of milk cows on farms in the United States during 2015 was 9.32 million head, up 0.6 percent from 2014. The average number of milk cows was revised up 2,000 head for 2015.”

Keith Good

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