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USDA says ag products finding new markets, as optimism slips

By RACHEL LANE

WASHINGTON, D.C. — Farmer sentiment is at a two-year low according to one measure of the market, based on current and future economic outlooks.

Purdue University and the CME Group Ag Economy Barometer asks 400 farmers a month if their attitudes and sentiments regarding the U.S. farm economy are positive or negative. The 2019 responses have trended lower each month.

In May, it dropped to its lowest level since right before the November 2016 election, to 101 out of 200 points – a 14-point drop in one month. The decline was the result of the producers’ perspectives of current and future economic conditions as worse than they were a month before.

The score has fallen 42 points this year, down 29 percent.

“Farmers are facing tough decisions in the midst of a wet planting season and a lot of uncertainty surrounding trade discussions,” said James Mintert, director of Purdue’s Center for Commercial Agriculture, the primary investor of the barometer.

Sentiment about everything from farmland values to an end to the trade war with China that favors the United States declined.

Shawn Hackett, president of Hackett Financial Advisors, speaks to farmers daily and he has noticed confidence has been down, but says it is not politically motivated.

He pointed out farm income is down by half from several years ago. Also for years, U.S. farmers have had almost perfect farming weather and large yields that contributed to an abundant supply of crops. The equity that was saved during the good years – when crop prices were high – begins to run out and farmers stop spending, as a natural consequence.

“When income is down, the only way to pull back on that … is you don’t spend anything,” he said.

This year, the wet weather across the country will result in smaller yields and should increase the cost of the crops and positively impact farm income, Hackett added.

That is not to say farmers aren’t worried about politics. The trade war is a concern, he explained – they worry about when it will end and how it will impact long-term trade.

“I think the trade war will work itself out,” he said. While China may not want to buy from the U.S., if supply is down globally, it won’t have a choice.

Hackett said this is the lowest he expects farmer confidence to get. It might take some time for the producers’ optimism to return, but he doesn’t think it will get much worse.

There is reason for optimism. According to USDA Under Secretary for Trade Ted McKinney, the U.S. has expanded market access for beef and pork to Argentina, poultry to India and Namibia, beef and poultry to Morocco, eggs to South Africa, dairy to Turkey, and lamb to El Salvador.

Japan has expanded market access for U.S. beef and has entered trade talks for a bilateral agreement. The U.S.-Mexico-Canada Agreement is one step away from completion, he said.

“While there are challenges, we are confident that U.S. farmers and ranchers will reap the benefits of these efforts,” McKinney recently noted.

China and the U.S. have been negotiating for six months, said Ambassador Greg Doud, chief agricultural negotiator for the Office of the U.S. Trade Representative. “I can say an important element of our negotiations has been to resolve a large number of unwarranted and longstanding trade barriers to U.S. agricultural exports,” he said.

The U.S. is the world’s largest importer and exporter of agricultural products, and for 50 years, U.S. agriculture has had annual trade surpluses, he explained. Both he and McKinney spoke to the Senate Committee on Agriculture, Nutrition, and Forestry last week during a hearing titled “Certainty in Global Markets for the U.S. Agriculture Sector.”

“In the past, agricultural exports have been a bright spot for the economy, supporting more than 1 million American jobs, including over 22,000 jobs in Michigan. Unfortunately, the administration’s reckless approach to trade has taken a toll on our ability to export agricultural products,” said Sen. Debbie Stabenow (D-Mich.), Ranking Member of the committee.

She said Michigan lost 230 dairy farms last year – the highest percentage of any state. Part of this is because of the retaliatory tariffs imposed in important trade markets. The dry bean industry lost customers in Europe due to tariffs, she said, while buyers in Mexico are looking for other sources for ag products because they view the U.S. as an unreliable supplier.

She is also worried about the long-term impact to the ag industry. “A short-term trade disruption can create a permanent loss in market share for American farmers.”

The Trump administration has announced a second round of assistance for farmers impacted by the tariffs, but not everyone will receive money, Stabenow said. The cherry industry in Michigan has been hit hard by unfair imports from Turkey and tariffs in China, but the administration says cherry growers haven’t suffered enough to qualify for help.

Meanwhile, foreign companies that own farms in the U.S. have benefited, she said. “After a Brazilian company received millions in taxpayer dollars, we recently learned that aid has also gone to a Japanese company with a troubling criminal history of corruption and bribery,” she charged.

More information regarding the Ag Economy Barometer can be found at https://ag.purdue.edu/commercialag/ageconomybarometer

6/19/2019