Major Economic Groups Acknowledge Headwinds in Agriculture

There’s no doubt that the nation’s food  producers are struggling to make ends meet.  Years of above trend yields in grains and expanding livestock herds have made price improvements hard to come by.  Now two groups, CoBank and the Kansas City Federal Reserve have acknowledged those struggles but say they also don’t expect things to get much worse
CoBank
The first of these reports was issued by CoBank, a segment of the Farm Credit System. Analysis by their Knowledge Exchange Division suggested that minus a major weather disruption, they anticipate surpluses of grains and oilseeds will continue over the next three years.  CoBank says the key to price improvement will be growing demand, which isn’t impossible given rising global incomes.  However, division manager Tanner Ehmke said that in order to take advantage of that, the US will need to be aggressive in securing free trade agreements.  He continued, saying “Acreage expansions and improvements to yields in competing export markets will be the headwinds for U.S. exports. . . The bright spot will be the continuing growth in demand. As the global middle class grows, so will the opportunities for U.S. exports.”  Relative currency strength will also be an issue as US wheat farmers compete against skyrocketing Russian production.  The same is true for US soybean farmers, now that Brazil has taken over as the world top supplier.
Kansas City Federal Reserve
In a shorter term outlook, the Kansas City Federal Reserve, which covers seven major agricultural states, says agriculture is showing signs of stabilizing although they remain poor. The Bank’s quarterly survey of Agricultural Credit Conditions says that as financial stress continues to build, income has continued to decline.  Farm income in the third quarter of 2017 was lower than last year, although declining at a slower rate.  Farmland values are somewhat lower than a year ago with irrigated crop land down three percent and non-irrigated acres down six percent.  The Fed’s assessment cautioned that while the duration of farm land value decline is rivaling that of the 1980’s, the magnitude of the decline is much less.
Somewhat troubling, however, was that farm loan repayment rated declined for the 16th straight quarter.  Bankers expectations of future declines in farm income have improve and most bankers indicated a sharp increase in the sale of farm assets is unlikely.