AGRICULTURE STILL SEEKING RELIFE.

• Author: Morgan, Jacob
• Position: ECONOMICS

U.S. AGRICULTURE is facing a number of challenges as slowing domestic and global economic growth rates, continuing trade talks, and erratic weather cast uncertainty in the short- and long-term markets. U.S. commodity markets remain focused on potential progress in U.S.-China negotiations and the ratification of the United States-Mexico-Canada Agreement (USMCA) pending the removal of U.S. steel and aluminum tariffs.

Trade disputes and global acreage shifts for this crop year may ease some downward pressures on prices. A slowing global economy may force animal protein and dairy sectors to scale back planned production increases as the year unfolds.

The latest Quarterly Rural Economic Review from CoBank's Knowledge Exchange Division indicates that, as global and U.S. economic growth has slowed, financial conditions in agriculture have remained highly variable across commodities and regions.

"U.S. agricultural producers and markets are in for a challenging year with economic uncertainty," says Dan Kowalski, vice president of CoBank's Knowledge Exchange Division. "There are a few bright spots, but growth is likely to average two to two-and-a-half percent with significant volatility in quarterly growth."

The report states that world economic growth has slowed from 3.8% in 2017 and 2018, and will likely average between three percent to 3.5%. China's economy continues to slow to 6.6%--lowest rate since 1990--as reduced trade flows and inability to stimulate domestic consumption hamper growth potential. Europe's growth potentials also have declined as uncertainties over Brexit and reduced trade flows to Asia have dampened optimism.

Also of note is that economic growth in the U.S. slowed significantly in 2018's fourth quarter (to a 2.2% annual rate compared to the three percent to four percent growth in the previous six months). First-quarter growth was impacted significantly by the government shutdown and ongoing trade disruptions.

As trade deals continue to be ironed out, a resolution of current trade disputes and global acreage shifts could influence U.S. producers. Sharp declines in farm income since 2014 have resulted in significant reductions in working capital of nearly 70% and rising levels of farm debt of nearly 24%. Devastating flooding in Nebraska and Iowa threatens the livelihood of many producers and will impede agricultural transportation and processing for months.

Domestic corn demand dipped by two percent despite continued growth in...