Radio Script 01-21-20

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.

When considering the supply of agricultural commodities, a recent USDA graph caught my attention. It depicted the average annual corn yield in the U.S. from 1989 to present. The graph showed that the 1989 yield was about 117 bushels per acre, with yields following an upward course to an average of 177 bu per acre in 2018. Even with challenging weather in 2019, farmers produced an average of 167 bu. per acre, which was 31% higher than it was 30 year earlier. Other graphs showed that since 1989, Soybeans also had a 31% increase in yield, rice increased by 24%, cotton by 22%, and wheat lead the major U.S. crops with almost a 41% increase. These statistics point out why over production has held prices in check down on the farm ever since the high prices of 2013 that were brought on by a severe Mid West drought, and why the end of the trade war may not be a cure for low commodity prices today.

At the Montezuma Valley Irrigation Company stockholders meeting last Saturday, stock holders voted to authorize the Board to pursue the purchase of Totten Lake, which is presently owned by the Dolores Water Conservancy District. Members voted based upon the number of shares they owned, with 14,972 votes for the purchase and 4,044 against.

Winston Churchill said, “No idea is so outlandish that it should not be considered with a searching but at the same time a steady eye.”

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