Ag Economy On Solid Ground

From left to right, top to bottom: Sara Wyant, Jeff Simmons, Seth Meyer, Monica Massey

The overall sentiment of ag economists speaking at the 8th Annual Ag Outlook Forum, presented by Agri-Pulse Communications and the Agricultural Business Council of Kansas City, is that the farm economy appears durable going into 2023.  Farm income is high despite high input costs and loan delinquencies are low noted Nathan Kauffman, vice president and Omaha branch executive at the Federal Reserve Bank of Kansas City. “Conditions are stronger,” he said, “but we’re starting to see risks.” Inflation concerns, though, are dampening optimism.  

USDA chief economist Seth Meyer said global demand is key to a prospering U.S. ag industry in the near future, and pointed to China’s “strong” return as an importer in 2021.  While noting shipping dynamics are somewhat better, he wondered what could happen if “FOB” rates rise. Erin Borror, U.S. Meat Export Federation’s vice president economic analysis, observed that China’s growing preference for beef has allowed the American beef cattle industry to extract higher beef prices from Japan and Korea. 

“Short-term profits are still looking good,” she said. “The challenge is that typically input costs don’t come down quickly, but commodity prices do. You could envision an environment where we get a couple good years of harvests and commodity prices pull back, but input costs might not because those tend to be stickier.” Continuing supply-side deficiencies, said Kanlaya Barr, director of corporate economics at John Deere, “is making it look like we’re still in recovery” from the global pandemic and its aftermath. She also has her “eye-on” the energy situation in Europe as winter approaches and on  China’s Zero Covid policy that could close more plants. 

Keynoters

Jeff Simmons, Elanco Animal Health’s president and CEO, provided a provocative address during lunch, calling on the ag industry to “provoke a discussion” about farming and environmental sustainability. He said in a survey of over 1,000 participants, Elanco found that two out of five people who avoid consuming meat believe animal agriculture is the biggest creator of greenhouse gases (GHG) in the U.S., contributing more than any other industry. “But that’s just wrong,” stated Simmons. “The farm is the starting point,” he said for creating a sustainable environment. “It’s time for a true farm-to-table approach where animal agriculture experts can bring their expertise to these global conversations so we can successfully collaborate to make a difference.” Simmons is bullish on the prospects for animal protein, saying demand for alternative meat protein has eroded and currently accounts for only 1% of the market. He also claimed that Generation Z (born in late 1990s to 2010) is becoming a promising market segment for meat-based protein.

Syncing with Simmons’ claim that the concept of sustainability began on the farm, Monica Massey called dairy farmers the “original sustainability scientists.” Massey, executive vice president at Dairy Farmers of America, focused her remarks on how challenges for an industry should be regarded as opportunities and investment in innovation as a sure way to grow a company and an industry. Massey offered an interesting observation to the effect that “industry used to drive the market, now consumers drive it.”

Aaron Annable, Chicago-based acting consul general, Consulate General of Canada in Chicago, described the vital partnership that exists between Canada and the U.S. He also joined ranks with the other Forum speakers in recognizing that “farmers are on the front line” in adapting climate-smart technology to cleanup and reduce Green House Gases.

Black Sea Turmoil

As moderator of the panel discussing the situation in Ukraine and its impact worldwide,  Kip Tom, CEO, Tom Farms LLC, implied some policies, crafted in the fog of war, may have contributed to food insecurity – rather than relieving it. Tom recently served as the U.S. Ambassador to the United Nations Agencies for Food and Agriculture. From 2019 to 2021, he was chief of the U.S. Mission to the UN Agencies in Rome. He pointed out that the lingering Covid pandemic also exacerbated food insecurity.

Daniel Whitley, Administrator, Foreign Agricultural Service, said the Memorandum of Understanding signed this summer by the U.S. and Ukraine could be a step toward easing disagreements. The MOU calls for a consistent exchange of information and expertise regarding crop production, emerging technologies, climate-smart practices, food security, and supply chain issues to boost productivity and enhance both agricultural sectors. Whitley added that attitudes of some  U.S. trading partners around the world needed to change. “We hear too often comments like this:  ‘If you don’t do it our way, we’ll cut imports’,” he said.

Christine Cochran, CEO, SNAC International, an international trade association for the snack food industry, indicated that the war has brought on shortages of key ingredients such as sunflower oil. She mentioned that in some cultures snack foods are considered dietary staples, not simply treats. Arlan Suderman, Chief Commoodities Economist, StoneX Group, Inc., said if the war were to end “today” it would take years to restore ag infrastructure.

Farm Bill 2023

Blake Hurst, Hurst Farms, former president of Missouri Farm Bureau, and Collin Petersen, former U.S. Congressional Representative and Chairman of the House Committee on Agriculture, engaged in a lively conversation. Farm policy is getting better, they agreed, because of better crop insurance provisions.  Both favored further improvements in crop insurance rather than larger emergency allocations. While both are apprehensive about “all the money coming into ag,” Petersen staunchly advocates for keeping SNAP benefits linked to farm programs. The nutrition title is the largest of the 12 titles covered in the 2018 Farm Bill, and SNAP accounts for 95% of that nutrition spending. Overall, nutrition spending makes up 80% of the Farm Bill’s total budget. Off the cuff, the two noted that 95% of all Congressional reps and senators do not understand farming or farm bills.  And no Democrats represent farm production areas.  Petersen observed that when he was ag committee chair there were only 26 Democrats on the Senate and House ag committees. “But I was the only one who wanted to be.”