2018-12 PAER: Agricultural Outlook for 2019
December 5, 2018
2019 Agricultural Outlook
The 2019 farm economy is going to be influenced by several ongoing issues. Those include the global trade war; strong U.S. and world economies; favorable 2018 weather with record crop yields; and a new farm bill covering the 2019 to 2023 crops.
Trade disputes have been the top news issue in agriculture. Trade tensions have cooled somewhat but uncertainty remains with potential large implications in 2019. Conflicts with three of our largest Ag customers China, Mexico and Canada had negative impacts on several farm commodities. An agreement has been reached with Mexico and Canada (USMCA) but still needs to be approved in each country.
Chinese tariffs on U.S. Ag goods continue to have the biggest impact on the farm economy. There is currently an agreement to stop escalating the conflict at least for a few months. Trade concerns with China involve the fundamental way each country does business so will not be easy to resolve. Yet, both countries have strong incentives to make progress toward a framework for working on these differences. Failure to resolve trade issues will be painful for U.S. agriculture. On the other hand a negotiated settlement could involve China buy- ing even larger quantities of U.S. Ag products and be friendly to farm incomes in coming years.
The U.S. and world economies have provided a solid foundation for buying Ag products with low unemployment, rising wage rates and strong consumer confidence. There are already expectations for slowing income growth in the U.S. and the world. Agriculture will face higher costs for inputs like fertilizer, labor costs, machinery and buildings and higher interest costs.
While weather is still largely an unknown for 2019, the favorable 2018 weather provided record corn and soybean yields. Sales from the 2018 crops will lap over into 2019 and provide a foundation for stronger crop- ping income. Corn prices are expected to be higher as well and the government trade assistance on soybeans was a meaningful addition to farm revenues in late 2018.
Farmers and agribusiness managers will spend time in 2019 learning about the new farm bill and the decisions they will need to make. That legislation largely continues the last farm bill with safety net programs of crop insurance and commodity support by either revenue guarantees or price guarantees.
In these articles we provide you with the driving forces that will determine the 2019 farm economy.
– Chris Hurt, Editor and Professor of Agricultural Economics