Graduate student shares his key takeaways from the
2019 USDA Ag Outlook Forum
Post-conference briefing by:
Agricultural Economics PhD student
On February 21-22, 2019, Anton Yang, Ph.D. student in the department of agricultural economics at Purdue University, attended the USDA’s 95th Annual Agricultural Outlook Forum in Arlington, Virginia. Upon returning, Anton provided us with a summary briefing that included his own interpretations and takeaways as well as pictures from the forum.
Canada Minister of Agriculture Lawrence MacAulay, U.S. Secretary of Agriculture Sonny Perdue,
and Mexico Secretary of Agriculture Victor Villalobos Arambula
I appreciate Professor Doering, Professor Widmar and our department’s generous support to attend the forum. During the conference, I met many interesting people from various research universities, government agencies, and private industries. I learned a lot in every conversation with them and also had chances to introduce some of the work we do here at Purdue on a daily basis.
U.S. Secretary of Agriculture, Sonny Perdue, during his keynote speech
The forum started with the USDA Deputy Secretary Steve Censky’s welcome speech and the agency’s Chief Economist Robert Johansson’s talk on agricultural economic and foreign trade outlook. The keynote speakers were: U.S. Secretary of Agriculture Sonny Perdue, Canada Minister of Agriculture Lawrence MacAulay, Mexico Secretary of Agriculture Victor Villalobos Arambula.
Canada Minister of Agriculture, Lawrence MacAulay, during his keynote speech
There were also other important guests who came to join the plenary panel discussions. They were Governor of Nebraska Pete Ricketts, NASDA CEO Barbara Glenn, Executive VP of Recombinetics Mitch Abrahamsen and the VP of Intrexon Jack Bobo. The first day’s dinner speaker was the Chairman of the U.S. Commodity Futures Trading Commission J. Christopher Giancarlo. There were also many interesting concurrent sessions held during the first and second day (e.g., grains and oilseeds, agricultural trade).
Mexico Secretary of Agriculture, Victor Villalobos Arambula, during his keynote speech
One key goal of this forum is to promote the U.S. producers to grow locally and sell globally. Four main areas were discussed throughout: the overview of U.S. farm economy; impacts of trade; crops and livestock sectors; and farm policies.
Before going into some selected details, by sitting at the Conference and listening to the speakers and Q&A's, my impression was that almost every single topic had, to some extent, concerns regarding the outlook of international trade. Recent rising trade tensions with China and the new United States-Mexico-Canada Agreement (USMCA) always lurked in the background beneath many discussion topics related to the U.S. agriculture.
Overall, the opinion of Mr. Johansson as to the macro factors affecting the U.S. agricultural economy seem to be not as optimistic for the next three years. The global GDP growth is forecast to remain between the range of 3.5 - 4.0 percent from 2019 to 2022, while the cumulative global purchasing power is projected to fall by $0.7 trillion. Coupled with the appreciation of the U.S. dollar and debt growths led by financing against real estate equity, there had been about 2.35 bankruptcies per 10,000 farms nationwide, while still much lower than the peak of 30 years ago. In the short run, forecasts regarding economic prospects over the next 6 months are mixed and are varied by institutions (including our own department).
Source: USDA, UofMich, Purdue, Fed Reserve, NAHB, Creighton
In the past ten years, owing to low inflation rates the percent change in food prices was about 16.3%, and is much lower than other major CPI categories, such as transportation, housing and medical care. Although the retail food at home prices have seen an increase just recently, the price levels across different food categories are still considered low. Factors that dominate the food-price moves in 2019 are production, energy prices and the U.S. dollar. Meanwhile the share of food expenditure is dominated largely by food away from home—about 45.2% (2017), all other retail categories are all below 11%, with eggs being the lowest share of spending—only 0.7% (perhaps partially owing to the high price increases).
One major question is: can we be different in different places? One of the USDA officials said, “... well, I hope this (trade war) will never happen again, but in case it happens again, we want to be prepared...” The USDA seeks to learn more about the production evidence of the U.S. farmers. Very importantly, the USDA wants to have a very clear understanding of the inventories of the U.S. producers. For example, in the livestock sector, not only the numbers of livestock, but also the sizes, types and categories are important. Moreover, the USDA is interested in knowing who (e.g., I am guessing what USDA meant here is the inputs from individual farmers) are directly impacted by the tariffs (e.g., tariff impacts on domestic producer prices). Furthermore, the retaliatory tariffs have huge negative impacts on supply and demand in the sectors of U.S. fruit and vegetables. Thus, coupled with possible situations of overproduction, good operations of cold storage is important to producers.
The USDA encourages the U.S. agricultural exporters to get familiar with the new program — Agricultural Trade Promotion Program (ATP; similar to the Agricultural Marketing Service — AMS). The main goal of ATP is to help U.S. farmers to mitigate the negative impacts of trade in the face of trade wars by assisting them in developing new markets.
Grains and Oilseeds
Globally, the crop production has far exceeded demand in the past many decades, leading the real crop prices to have gone down largely since 1960, while the world outputs haven risen several folds (of which soybeans have increased amazingly—by about 1,190%). Because of the trade disputes with China, the soybean prices in the U.S. have seen a big wave of declines since mid-2018, converging with the prices of Brazil and Argentina since December 2018. The China tariffs contributed to declines in the U.S. soybean exports. The exports of U.S. soybeans to other countries have increased (with small numbers), but the amounts could not at all be recovered from the loss in China. The retaliation of China against soybeans from the U.S. will likely have a long-term impact on soybean stocks in the U.S. This impact is projected to remain in effect at least 10 years from now. Meanwhile, the global corn trade is projected to increase in the next two years, while wheat exports are expected to decline due to the rebounding exportables from the Europe and Australia.
While trade is among the most critical issues of the outlook for U.S. grains and oilseeds, a few other issues are not negligible and have become increasingly important. For example, the U.S. and international weather (especially spring weather in the U.S.), and global supply and demand of ethanol, are all important factors that worth paying close attention.
There are also indirect global impacts of the escalating trade tensions on other markets. For instance, one participant from the Buenos Aires Grains Exchange pointed out that the soybean FOB prices have declined in Argentina (and also in Brazil), which contributed to declines in the soybean production. Due to drought and the fallen prices in the U.S., the soybean’s exporter, instead, has highly demanded soybeans imports from the U.S. last year, to satisfy its domestic demand in the soy-crushing sectors.
Genetically Engineered Foods
The panel discussions during the first day have centered on the genetically engineered products. One impressive concluding remark mentioned by a participant was: “...instead of teaching people how biotechnology works and is used, we may now want to tell them why we use them...and it is likely a more efficient way (to increase public perceptions)...”
For more information about the USDA’s 95th Annual Agricultural Outlook Forum and participants’ presentations, visit the USDA Forum "At a Glance" website.