Economist Glynn Tonsor Addresses Recession Rumors, Why that Should Concern Cattle Producers

 

OKlahoma Farm Report

09 Jan 2019 

 

In these early days of 2019, it is a good time to stop and take stock of where the beef industry is currently in regard to the economics of beef production. According to Kansas State University Ag-Economist Dr. Glynn Tonsor, things have gone well for the beef industry as far as consumer demand goes. And that, he says, has not just been the case for this last year - but the last several years.

 

“We’ve had a very positive beef demand environment both domestically and abroad, pretty much since 2010. It’s been several years since we’ve had something as adverse as the Great Recession,” Tonsor said, alluding to recent speculations of a possible economic downturn in the near future. “I’m not forecasting that’s going to happen again, but I do think it’s prudent for us to remember what happens in a recession - beef demand tends to take a notable hit… Beef is an expensive item that is sensitive to macroeconomics. When we have a recession, it’s likely we’ll have a demand pullback.”

 

Tonsor continues to explain that over time, the beef industry has become more and more complex; further intertwined with the export market and has developed greater dependence on foreign demand. This has resulted in increased sensitivity to the macroeconomics of not just in the US, but globally. Several factors at play in the marketplace, now have a significant impact on beef demand and transitively on the price of beef and cattle which ultimately affects producers’ bottom line. Right now, uncertainty pertaining to the stock market and the continued strength of the US and global economies are all things Tonsor says producers should be paying attention to moving forward. What has influenced markets recently as well and will continue to until resolved, are ongoing efforts by the Trump Administration to negotiate new terms of trade with some of our nation’s major partners in commerce, like China, Mexico and Canada. Not to mention the complications of resulting retaliatory tariffs that earlier this year launch an all-out trade war. But, despite all the perceived negative pressure that exists, Tonsor admits that beef demand has outperformed most people’s expectations - though he warns not to take for granted the success of recent years as the industry hopes to make a repeat of last year’s accomplishments in 2019...

 

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