Welcome to Agriculture Economic Tidbits, a weekly e-newsletter (emailed Mondays) for farmer and rancher members of Nebraska Farm Bureau. Agriculture Economics Tidbits will provide you with timely tidbits of economic information and policy analysis focused on Nebraska’s largest industry, agriculture, and its key players, Nebraska’s farmers and ranchers. The newsletter will break down global and national economic trends and what they mean for Nebraska agriculture, stay abreast of latest market movements, and provide the latest results from Farm Bureau research on current policy issues like property taxes, school funding, farm programs and international trade—all with the goal of helping you maintain a viable farming or ranching operation.
As noted in last week’s edition, producers are increasingly turning to debt to finance their operations. Fortunately, with today’s interest rates, the interest costs on the debt are relatively low from a historical perspective.
“There are [U.S.] firms that rely heavily on China as a supply base and market, from Apple to General Motors, which sells more cars in China than in America.” China’s view of America, 440-pound rivals, The Economist, January 4th, 2020.
Last year was a doozy for Nebraska farmers and ranchers. Blizzards, floods, delayed planting, livestock death losses, a late harvest, trade disputes, and other out-of-the-ordinary events created production problems, management headaches, and higher costs.
The continued struggle to generate positive income has led to higher producer debt levels. Survey results from the Tenth District Federal Reserve Bank in Kansas City show loan renewals or extensions were higher than the previous year in the third quarter of last year.
Nebraska average land values since 1970 are plotted in Figure 3. After experiencing unprecedented growth between 2004 and 2014, when growth rates exceeded 10 percent in 9 out of 10 years, land values have cooled.
Statistics show 35 farm bankruptcies were filed in Nebraska through September 30, 2019, or 19 percent more than the same period for the previous year (Figure 4). Nationwide, farm bankruptcies over the same period were 24 percent higher.
“If all we want are jobs, we can create any number—for example, have people dig holes and then fill them up again, or perform other useless tasks. Work is sometimes its own reward. Mostly, however, it is the price we pay to get the things we want. Our real objective is not just jobs, but productive jobs—jobs that will mean more goods and services to consume.” Milton Friedman.
Two developments on the trade front can be celebrated by Nebraska agriculture. First, Democrats in Congress, the Trump Administration, and Mexico have agreed on provisions to include in the United States-Mexico-Canada Agreement (USMCA) which should pave the way for passage.
U.S. exports of petroleum have exceeded imports for the first time in 50 years. The U.S. Energy Information Agency (EIA) estimates that the United States exported 140,000 barrels/day more total crude oil and petroleum products in September than it imported. If confirmed, it would be the first time the United States exported more petroleum than it imported since EIA records began in 1949.
A common refrain heard at recent Nebraska Farm Bureau meetings is this year can’t end quick enough. The year was filled with enough unusual, atypical, unexpected, and low probability events to last a life time.
The record operating margins for packers following the fire at the Tyson facility in Holcomb, Kansas, elevated ongoing concerns in the cow/calf sector regarding the share ranchers receive of the retail value of beef.
“People have been generally moving out of cities and rural areas, and into suburbs, as suburbs have seen net increases in migration of at least 2 million since 1987. But this year, for the first time since 1998, rural areas drew more residents from cities and suburbs than they lost.” Americans are moving less than ever before, Jeff Andrews, Curbed, Nov. 22, 2019
An astute reader caught an error in last week’s story concerning USDA beef market projections. The story mistakenly reported this year’s production, imports and exports in “million” pounds, when the figures should have been reported in “billion” pounds. The corrected language is:
The American Farm Bureau Federation’s 34th annual survey of traditional food items found on the Thanksgiving Day dinner table indicates the average cost of this year’s feast for ten people is $48.91, a one cent increase from last year. That is less than $5.00 per person.
“For example, while farmers are expected and sometimes observed to adapt to the shifting long-run climate pattern, Dell, Jones, and Olken (2014) argue that certain governmental agricultural support programs (such as subsidized crop insurance program) could have reduced farmers’ incentives to adapt. Therefore, there could be a tradeoff between reducing farmers’ revenue risk and increasing agricultural productivity.” Sun Ling Wang, Eldon Ball, Richard Nehring, Ryan Williams, and Truong Chau; Impacts of Climate Change and Extreme Weather on U.S. Agricultural Productivity: Evidence and Projection; Working Paper 23533; National Bureau of Economic Research.
Tidbits does not include links to crop progress charts this week due to the Veterans Day holiday. Thanks to those who serve or have served in our nation’s armed forces. “Never was so much owed by so many to so few.”—Winston Churchill.