In this file:
· JP Morgan Calls U.S. Ag Fundamentals “Rapidly Deteriorating”
· AFBF Chief Economist John Newton Says Farm Crisis Brewing - But Not Without Its Bright Spots
JP Morgan Calls U.S. Ag Fundamentals “Rapidly Deteriorating”
JPMorgan analyst says American farmers are off to a slow start in 2019/20.
Greg Henderson, FarmJournal's Pork
May 14, 2019
America’s largest bank says U.S. agriculture faces a three-pronged crisis. JPMorgan analyst Ann Duignan sent a note to investors yesterday calling the fundamentals of agriculture “rapidly deteriorating.”
The three-pronged crisis of declining exports, a poor crop of corn and soybeans and the trade war with China, have created “a perfect storm for U.S. farmers,” Duignan says. Besides tariffs, Chinese import demand for soybeans will likely decline due to the approximate 30% loss of its hog herd after the outbreak of African swine fever (ASF).
Duignan also noted Brazil and Argentina have produced a near record soybean and corn yield, while the U.S. dollar strength remains a headwind for global trade.
“As a result of tariffs and excess global supply, US soybean export inspections are down 27%” year over year, Duignan said. She added that, at the same time, South America is having a banner year for production so “the export market is growing ever more competitive.”
Domestically, “the Midwest is off to a very slow start in 2019/20,” Duignan said. The planting season...
AFBF Chief Economist John Newton Says Farm Crisis Brewing - But Not Without Its Bright Spots
Oklahoma Farm Report
14 May 2019
Farmers are currently facing one of the harshest economic downturns in recent memory. With depressed markets, changing global dynamics and a litany of international trade disputes ongoing, the ag industry has seen a 50 percent reduction in farm income in just two years’ time.
“Not very often do we see something like that,” said American Farm Bureau Federation Chief Economist Dr. John Newton in an interview with Radio Oklahoma Ag Network Farm Director Ron Hays during the Washington Watch event this week in DC hosted by the National Association of Farm Broadcasters. “As a matter of fact, we’ve seen farm incomes fall and remain at these depressed levels. That’s really the big challenge.”
In years past, Newton says it has been normal to see farm incomes cyclically dip one year and bounce back the next. In the present environment though, Newton says producers are starting to quickly burn through equity, bringing many to the end of their rope. This is of course compounded by persistently unresolved trade issues that continue to add to the burden of low economic activity in the ag sector.
When asked if he believed the US to have a “farm crisis” on its hands, Newton responded that indeed he could see a “perfect storm” of sorts brewing. According to him, more and more producers are transferring their short-term debt to their long-term debt. Lenders have increased their denials of operating loans and across the country, farm bankruptcies are on the rise.
“That’s not a recipe for future success,” Newton said. “I do see a perfect storm brewing where if we don’t see this trade situation resolve or there’s no financial assistance to farmers, it’s going to be really difficult to pencil out any type of profit next year without some sort of resolution to trade.”
With China’s market essentially closed to US ag products, US producers have watched exports to China drop by $10 billion landing the US ag industry a significant blow. If anything, Newton says this should make the US realize its had too many eggs in one basket and should work to diversify and spread its risk more evenly around the world with other trading partners.
Despite the bleakness of the situation currently, Newton says it is not all bad, noting one particular bright spot in the ag economy right now...
more, including audio [5:24 min.]