Both
commodity and stock markets were down yesterday due to concerns about
the coronavirus
outbreak
in China. Investors
dumped stocks related to travel, consumer products and companies with
close links to China, while
commodity
traders and farmers were spooked by the possibility that China might
declare an emergency and pull back on purchase commitments made to
buy U.S. agricultural commodities. Corn,
soybeans, wheat, live cattle and
lean
hogs were
all down at the end of trading yesterday afternoon.read more
A trade war isn’t the only problem with low prices.
The
almost
two year
wait for clarity concerning the U.S/China trade war finally ended
with the signing of a Phase One agreement last Wednesday. The
agreement was touted as a great win for agriculture, with promises of
increased
purchases of a wide variety of agricultural goods, including grains,
oil seeds, pork, poultry and beef. But details of exactly how much
China has agreed to purchase varies with who’s telling the tale.
Just prior to the signing the agreement, China’s Vice Primer Lieu
stated that three
factors would help
determine Chinese purchases: 1st,
domestic
demand, commodity prices around the world, and by both nations
encouraging
trade.” He went on to say that as the living standards of the
large Chinese middle class rises,
China will import fine quality agricultural products from around the
world. On the other hand, speaking at the American Farm Bureau
Federation Convention in Austin, Texas last
Sunday,
President Trump said, “I’ve told everyone you’ve got to buy a
lot of land and we’ve got to get much bigger tractors right now.
We’re going to sell the greatest product you’ve ever seen. He
went on to say that under
this landmark agreement, China will be purchasing $40 billion to $50
billion of American agricultural products every single year, tripling
our agricultural exports to China.” But on
Saturday, attendees
had heard a
more
cautious talk from John Anderson, the former deputy
chief economist of the American Farm Bureau Federation and a
professor of agricultural economics at the University of Arkansas.
He pointed
out that the
U.S. and China signed a phase one agreement that calls for China to
purchase $36.5 billion in U.S. agricultural goods in 2020 and $43.5
billion in 2021. In 2017, the Chinese purchased $24 billion in
agricultural commodities from the U.S. But,
Anderson pointed out, that
if
a rebound in the supply of agricultural commodities gets ahead of
demand, it could mean a “fairly negative outlook for agriculture
in the
near term. Time
will test how well the new agreement will impact farmers and
ranchers.read more
The
2019 hemp rush reminds me of stories about the 1859 Pikes Peak Gold
Rush, that attracted thousands of gold seekers to the central Rocky
Mountains, many of whom painted Pikes Peak or Bust on the canvas
covers of their wagons when they headed west. Within a couple of
years, many of these miners headed back east with signs on their
wagons reading Pikes Peak or Bust with Busted by Thunder! Added. By
late winter last year, hemp was being promoted as a sure thing for
instant wealth. Newspaper articles were quoting promoters who
claimed that hemp growers would make $50,000 per acre for anyone who
planted the crop. Businesses to supply potted hemp plants and seeds
to eager growers and to buy and process the crop for CBD oil that has
sprung up in 2018. But Extension specialists and management
consultants were recommending that both farmers and potential growers
take a cautious approach to growing the untested crop, and start out
with no more than an acre of hemp to learn how to grow it. At the
same time, the number of licenses to grow hemp in the U.S. grew from
about 3,500 in 2018 to almost 17,000 in 2019. But undeterred, many
neophyte growers borrowed money or used retirement accounts to
finance land leases and purchasing inputs that amounted to $15,000 to
$20,000 per acre. In February of 2019, the price for hemp biomass
used for CBD oil extraction was quoted at $50 per pound, indicating
that at a yield of 1,000 pounds per acre, a gross return of $50,000
per acre was possible. But the Devil’s in the details. Hemp is a
crop not unlike wheat, beans or corn. Weather, irrigation, weeds,
pests and disease can impact the crop, and like all other crops,
supply and demand come into play. By the end of 2019, many hemp
fields had been abandoned in the Four Corners Region. Whether it was
because of the lack of knowledge about how to care for the crop, the
hard work involved, weed infestations, and plummeting hemp biomass
prices, the end result was that some of the optomistic growers were
like many of the 1859 miners, busted by thunder. Currently, most
growers who harvested a crop are holding it, waiting for prices to
return to a profitable level when the demand again matches the
supply.
read more
Here in the Four Corners Region, farmers and ranchers keep an eye on
moisture, both in the soil and in the mountain snow pack. The U.S.
Drought Monitor indicates that all of the Region is in severe
drought, and the Four states have abnormally dry to severe drought
over more than half of their land mass. However, at this point in
time, the NRCS Snotel Update Report indicates that the Upper Colorado
River Basin has 118% of normal snow pack, measured in snow water
content, with the Dolores watershed at 126% of normal, the Animas is
121%, the San Juan is 111% and Southeast Utah is a great 176% of
normal. Farmers wonder, will it last? National Weather Service 90
day forecast predicts that the Region will have below normal to
normal temperatures and average precipitation, Generally, winter
weather in the western U. S. is influenced by weather patterns
generated by El Niño, the cooling phase or La Niña, the warming
phase of sea temperatures across the tropical Pacific. When active,
these patterns send regular train loads of moisture-laden storms
across the United States, dropping snow in the Rockies, providing
most of our annual precipitation in the winter. When these patterns
are in neutral, as they are this winter, the trains don’t run as
often, and predicting their schedules is harder.
read more
As 2019 ends, so does the decade. Many farmers and ranchers will agree that 2019 has challenged them with unfavorable weather, trade wars and uncertain markets, but farm income increased by over $10 billion from 2018, mainly due to federal trade mitigation payments. Farmers are looking forward to an end to Trade war with China in early 2020. The decade of 2010s has been quite a ride for agriculture. Net farm income will amount to $92.5 billion this year, which is pretty close to where we started the decade, but income charts look like a roller coaster, going from $90 billion in 2010 up to $135 Billion in 2011, down to $110 billion in 2012, back to $140 billion in 2013, and sharply down to $55 billion in 2016. The ride back up to over $90 billion has been slow the past three years resulting in farm debt rising this decade from about $320 billion to a projected $416 billion this year, which is just slightly less than in1980, at the height of the farm debt crisis. That number could be interpreted as a significant problem, but non real estate debt has remained static this decade, and although real estate debt is higher than in1980, farm real estate values have risen at a consistent rate, keeping pace with the increasing amount of real estate related debt.read more
The
2018
U.S.
Census of Agriculture is
still reveling some interesting statistics that
indicate that
farm
sizes are growing and that
over
all farm numbers have declined since the 2012 census by over 3%.
According
the census, there
are 2,042,220 farms and
ranches in
the United
States that utilize
just
over 900
million
acres
of land. About 243 million of these acres are
dedicated to oilseed and grain production, while cattle operations
and dairy farms use 405 million acres, and farms producing fruits,
vegetable and nursery crops account for just 27 million acres of
farmland the rest of the acres are used for forage production,
cotton, and a variety of minor crops. The top five states ranked
according to the number of farms and ranches include Ohio at number
5, with almost 88,000 farms, Oklahoma is number 4, Iowa is number 3,
Missouri is in second place, and maybe you guessed it, Texas is
number one with well over a quarter of a million farms and ranches.
read more
Over the past two trading
days, commodity markets reacted positively to the news that a phase
one trade deal has been struck with China, but doubts still linger.
On Friday, the Wall Street Journal reported that an agreement had
been reached, but early in the day, President Trump told reporters
that that was fake news. A couple of hours later though, a
government spokesperson acknowledged that an agreement had been
reached. Yesterday, commodity markets closed with corn up 7 cents
per bushel, soybeans gained 14.5 cents and wheat out shined all of
the grains by gaining over 17 cents for the day. While this news
seems to indicate that the year-and-a-half ole trade war is finally
winding down, ag economists are and trade analysts are telling
farmers to be cautious about reading too much into the preliminary
trade deal. Trade Representative Robert Lighthizer stated that
larger farm exports would be a major element of the target of $200
billion a year in manufacturing, agriculture, services, and energy
sales to China, and by the second year, the U.S. will almost double
exports of goods to this country if the agreement is in place. But
Joe Glauber, Senior Research Fellow at the International Food Policy
Research Institute pointed out that officials spoke as if farm trade
was running at $21 billion a year, a level seen before the trade war.
So the minimum of $40 billion annually in sales would require an
increase of $16 billion or so over the amount of agricultural
products shipped to China in 2017, before the trade war started. On
November 25th, Glauber said that “It will be very hard
to get to the $40 bil let alone $50 billion promised.” So ag
economists and farm management advisers are counseling farmers and
ranchers to a while before inking contracts to buy new half million
dollar tractors or signing a deal to purchase more land, because
there are still too many unknowns about this trade pact.
read more
Last week, Federal and state regulators issued guidance to clarify that financial institutions no longer need to report customers who are growing or cultivating hemp to federal banking regulators . In the past, Banks were required to file “suspicious activity reports”concerning customers who grew hemp related products, even after industrial hemp was approved as a crop in the 2018 Farm Bill. This guidance followed the recent release of the USDA’s regulations concerning growing hemp in the U. S. Even though industrial hemp, which is restricted to .3% THC, the active ingredient in marijuana, was approved as a legitimate crop in over half of the states, until the USDA regulation came out, federal regulations maintained that hemp was a Schedule one drug, which created a nightmare for some growers who shipped their crop out of their home state.read more
Farmers and ranchers welcomed last week’s snow fall even though it created some travel problems in the Four Corners Region. The precipitation was the first significant moisture since late last May. According to USDA Snotel reports the Region’s snow pack for November of this year was about 25% of what was reported in the Dolores, San Juan and Animas River basins in November of 2018. Snotel reports track snow water content, which is stored in the snow and released in the Spring. At this point, these river basin’s have about 60% of the average snow pack for the same date, which is calculated on a 30 year average. Looking at National Weather Service long range weather predictions, the Four Corners Region may have a bit higher than normal precipitation and temperatures through December, but over the next three months precipitation is mayreturn to normal with higher than normal temperatures. read more
The American Farm Bureau Federation’s 2019 survey about the price tag for a traditional Thanksgiving meal for 10 people found that it will cost just a penny more than it did in 2018. That amounts to less than $5 per person. Some of the items for this meal includes turkey, stuffing, mashed potatoes, cranberries, sweet potatoes, vegetables, pumpkin pie and whipped cream. Adding ham to the meal would only add about $.60 to the feast. read more