What does ag industry future hold for 2019 and beyond?

By Brent Adams

Commodity prices, ongoing trade talks with China and weather conditions all loom large as concerns for producers in 2019, but American Farm Bureau Federation President Zippy Duvall says that American farmers and ranchers should focus on the many positives in the agriculture industry.

The American Farm Bureau Federation held its annual convention and 100th anniversary celebration Jan. 11-16 in New Orleans. There, Duvall conveyed to the membership optimism for a prosperous future and looked ahead to his vision for the next 100 years.

Zippy Duvall – American Farm Bureau Federation President

Prior to the convention, he spoke to Fastline about his long-term outlook for the agriculture industry.

“I know how much everyone wants to get 2018 in the rear-view mirror, but we’re always optimistic. That’s what I love about farmers,” said Duvall, who owns a farm in Georgia. “The challenges aren’t going to get any easier for American farmers and ranchers, but the opportunities are so big, and we don’t even know what some of those opportunities are yet because they are going to come by way of technology.”

He added that as Farm Bureau and other ag organizations work with telecommunications companies to expand broadband Internet access to rural areas, he expects to see a rural revitalization many thought might never happen. The new farm bill earmarks $600 million in federal funds for rural broadband expansion that will be managed through the U.S. department of Agriculture. The next step will be working to map out the expansion so it is conducted logically.

“We’re going to be generating not only agricultural growth, but jobs around that agricultural growth,” Duvall predicted. “American Farm Bureau will provide that vehicle for those farmers and ranchers to have their voices heard.”

Political Influence for Agriculture

Duvall, who played host to President Donald Trump during the convention, said he is optimistic Trump and U.S. Department of Agriculture Secretary Sonny Perdue are taking a pragmatic approach in their dealing agriculture issues, from the recent signing of the farm bill to ongoing trade discussions with China.

“This president talks about agriculture and talks about farmers more than any president in my lifetime,” Duvall said. “If you look at what has happened around trade with this president, he threatened to withdraw from NAFTA, went into a renegotiation with us saying ‘do no harm to agriculture’ because NAFTA was very good to agriculture—it went from $8 billion in trade (pre-NAFTA) to almost $40 billion and was growing, so not only did he not do any harm, he actually went better than what PPP would have done for us in this new USMCA agreement and he said he would have it done before summer was over with and it was done in August. Everything he has said so far he has delivered.”

Duvall said he expects the Trump Administration to make further headway in trade talks with China over the next 90 days.

Complicated relationship with China Remains Big Concern

David Widmar, an agricultural economist and co-founder of West Lafayette, Indiana-based Agricultural Economic Insights, said the United States’ complicated relationship with China remains one of the big concerns for farmers and ranchers in 2019. What resolution is reached is still anyone’s guess.

David Widmar – co-founder of Agricultural Economic Insights

“This is the biggest issue we have been facing in American agriculture over the last eight to nine months now,” Widmar said. “To say it is a complicated situation is an understatement. We have a lot of moving parts and a lot of different interests… The big question for agriculture is “What does it mean for U.S. ag exports to China?’ Do we export a little more to China? Do we export a lot more to China or do the trade talks break apart and we get very little growth or no growth in exports to China? The deadline is going to be coming up quickly, and I believe it will have some impact on commodity prices and affect planting decisions producers make early in the spring between soybeans and corn and other alternatives.”

In addition to trade, other factors expected to have an impact on the agriculture economy in 2019 include ongoing short-term interest rate hikes, which Widmar said bear watching, but likely will not have much of an impact on operating lines of credit. However, if they translate to higher-term rates they might affect long-term asset prices.

Inflation’s Impact

Widmar said most observers believe the end of short-term rate increases in near, though the Fed’s decision could be driven be any signs of an increase inflation.

Widmar said he and his business partner Brent Gloy will continue to look at the impact of the farm bill, implications of new tax laws, unpredictable weather, oil prices, fertilizer prices and shifting grain stockpiles to determine the health of the agriculture economy in 2019.

“The last two years really have been about trying to size up the supply and demand situation,” Widmar said. “We had a lot of expansion and increased production and now we’re on the other side of that, saying ‘How do we adjust production now?” The last five years we have big corn and soybean crops in the U.S., (as well as) the trade war. A lot of bad news in the farm economy. We want to encourage producers to keep diligent, keep working on their budgets and farm financial statements and keep making adjustments to their operations, but keep in mind that we’re looking for some positives.”

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