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The Agricultural Business Council of Kansas City and Agri-Pulse Communications brought together top economists, industry leaders and government officials to offer unique insights during their 9th annual Ag Outlook Forum. Bob Petersen, executive director, Ag Business Council of Kansas City added that, “the event has become a ‘must attend’ for agribusiness executives looking to re-set their expectations heading into the fall harvest.”
By: Dennis McLaughlin, McLaughlin Writers LLC

Ag Economy On Solid Ground

The resonant message coming from agriculture economists, policy makers and ag business leaders at the 9th Annual Ag Outlook Forum is that the farm economy appears durable going into 2024. But Roland Fumasi, head of the North American food and agribusiness division of RaboResearch, cautioned somewhat sarcastically “that economists have forecast four of the last nine recessions.” Nevertheless, Fumasi summed up his presentation optimistically, saying that while cash flow will be challenged in the upcoming year, overall liquidity should remain intact. The outlook for the agriculture economy is not great, he conceded, but it enters 2024 “from a strong financial position.”

Economics, policy, technology and best practices aside, the most positive, ringing endorsement of the state of the U.S. agricultural industry came from Denver Caldwell, John Deere’s U.S. & CA director of sales. Concluding his presentation on John Deere’s involvement in agriculture, communities and education, Caldwell claimed the if anyone is looking for a job in advanced high technology, “It’s right here in agriculture and by association at John Deere.”

In her opening remarks for the Ag Outlook Forum, Sara Wyant, founder, editor and publisher of Agri-Pulse, quizzed attendees about their concerns regarding the ag economy. There was an abundance of anxiety-causing culprits, but farm policy or the lack thereof is making the ag industry nervous. Other concerns centered on crop insurance, funding to avert a government shutdown, regulation and what the Farm Bill would look like.

Nutrition At A Glance

At the end of the day, agriculture is all about eating. Dr. Sprio Stefanou, administrator for USDA’s Economic Research Service, delivered a positive keynote message that global food security is estimated to improve this year relative to 2022 due to an average of 3.7% growth per capita GDP and relative easing of international and domestic food commodity price levels. “Despite improvements, though, food insecurity in 2023 remains elevated,” Dr. Stefanou said. The prevalence of food insecurity is estimated at 26.6% for the 83 countries included in the International Food Security Assessment (IFSA) model developed to evaluate food security outlook of low- and middle-income countries. Food insecurity is projected to decline by 2033 in IFSA counties. However, 385.9 million people in the 83 IFSA countries will still be food insecure. “But,” said Dr. Stefanou, “that will represent a decline of 66.1% food insecure people from 2023.”

Hans Kabat, president of Cargill Protein North America, covered a wide range of issues and situations facing growers, food animal producers and processors. The ag industry overall has reached an “inflection point” influenced by climate change, advanced farm technology, rural flight and labor shortages, among others. The key to coping with it requires reframing challenges as opportunities.

“Farmers and ranchers are on the front line of the battle to provide food,” Kabat said, recalling that they got things done despite the array of disruptions Covid-19 brandished. “It took optimism and ability to meet those challenges.” He recalled the quip from Will Rogers: The farmer has to be an optimist or wouldn’t still be a farmer.

Kabat maintains that “producers who succeed are those who seek a new way.” The same initiative applies to processors and packagers, he pointed out. For example, while Cargill continues to package standard meat cuts and grades, it has stepped up market research to learn more about what foods young, affluent consumers want. On the issue of animal protein versus plant-based protein, Kabat said his company has its eye on all sources of protein. But he says the market share for plant-based meat alternatives will be small.

EPA Update

Rod Snyder, EPA’s senior advisor of agriculture, filled in for EPA chief Michael Regan, who had a last minute change in his schedule and could not address this year’s Forum. Snyder stressed that Regan’s North Carolina upbringing and family background in agriculture was a key component of his understanding farmers’ concerns about EPA regulations and pending rules. Snyder said Regan’s insight into agriculture is guiding his efforts to minimize EPA’s impact on farmers and producers. “He is eager to work with agriculture to mitigate conflicts.”

The Endangered Species Act has been a festering thorn for both the EPA and agriculture for a long time. Both parties have been struggling with the science, he noted. For the record, in a House Ag Committee hearing held in Lincoln, Nebraska last April, EPA Administrator Regan said, "I believe if that had been done in the past, we wouldn't have 50 years of ignoring the ESA, and this administration wouldn't find itself in the position that is in.” Accordingly, Snyder synopsized the situation saying it is imperative that the science is correct and farmers have the education to avoid over-spraying. Snyder confirmed the Renewable Fuel Standard (RFS) “is getting back on track.”

The EPA is drafting a rule to allow permanent year-round sales in eight states. As for WOTUS, Snyder said the issue could go before the Supreme Court for yet a third decision. The problem, he explained, is that “clean water rests on what is an irrational definition.”

Top of Mind

Several experts weighed in on issues agriculture faces in the coming months and in 2024. While fertilizer costs in Europe and South America are unstable, prices in the U.S. have settled. Fall applications will be relatively normal, according to Ken Seitz, president and CEO of Nutrien, a producer of potash, nitrogen and phosphate products. Growers worldwide jumped into the market and secured supplies, which ran prices up, he said. “On this continent, I’d like to think that prices have stabilized,” Seitz said. “We’re looking at a pretty open fall application here in this country and we’re watching normal buying patterns and normal inventories in the U.S.” Global potash usage is normally about 71 million tons per year, but last year the world’s farmers only applied 63 million tons, Seitz said.

Seth Meyer, USDA’s chief economist, said global competition for corn and soybean production is being closely monitored. Brazil is forecast to have record corn and soybean planting and production. “It will be interesting to see how competitive the U.S. will stay with South America as the export season picks up,” he noted. Brazil is expected to compete with the U.S. for the China corn market. China has been boosting its corn imports from Brazil to diversify its source. The real challenge, said Meyer, will come from the cost of getting corn into China. On the bright side, though, he pointed out that strong U.S. domestic demand for soy could compensate for lost corn business in China.

That domestic soy demand could be timely. Arlan Suderman, chief commodities economist for StoneX Financial, Inc., FCM Division, explained that it is about time the U.S. soy industry started looking in earnest for other markets “as China drops its demand for soy.” Suderman offered four ‘take home points’ for U.S. agriculture to consider:

  • Do not count on Chinese demand to be what it was in the past.

  • India offers the next opportunity for expansive growth; but it will take time to develop.

  • Focus on developing other markets, especially the U.S. domestic market.

  • Focus on renewable diesel and sustainable aviation fuel.

Krista Swanson, lead economist for the National Corn Growers Association, said farmers could expect interest rates to remain around current levels or slightly higher. She advised them to make plans for capital purchases carefully. Sometimes farmers can’t hold off on capital purchases, but if they have the option to do so, she said they could see relief on interest rates over the next year. USDA is projecting lower net returns than what corn growers enjoyed over the last two years, said Swanson, but margins are still positive. “Growers still need to adjust to a tighter margin environment.” Her ‘take home messages’ include these:

  • Projected 2024 cost of production is lower than 2023 costs for all major commodity crops.

  • Despite lower dollar costs of production, falling prices push margins to break-even or lower.

  • If 2024 crop insurance projected price is lower, revenue guarantees will be lower.

  • Despite fewer acres, USDA projects corn production as yields increase by two bushels per acre annually over the next decade.

Policy Update

Blake Hurst, farmer and retired president of the Missouri Farm Bureau, hosted Kansas’ U.S. Congressional Representatives Sharice Davids and Tracey Mann in a discussion on politics, policy and possibilities. And the 2024 Farm Bill. Hurst put the importance of agriculture in perspective, saying that when the first Farm Bill was created in 1934 farmers represented 25% of the U.S. population. Today farmers account for only 1.3% of the population. Yet U.S. agriculture provides 88% of Americans’ diet.

While optimism has run out for getting the Farm Bill passed in this fiscal year ending September 30, Rep. Mann is confident that it can be hammered out by the end of the calendar year. But he stressed it was more important to “get a bill done right than just getting it done.” And he reminded everyone that Farm Bills are amendments.

Rep. Davids indicated she was deeply concerned that the bill was not on track. At the same time, Rep. Davids wants to ensure the Farm Bill in its final rendition would serve the state of Kansas appropriately. She noted that it was important to have Democrats from agricultural states serving the House and Senate Ag Committees. She acknowledged she was learning more and more about ag’s importance to Kansas.

A big snag in the process of writing and passing a new bill is the SNAP program, which allocates 81% of Farm Bill funds to food and nutrition and 19% to crop insurance. Also, Rep. Mann and Republicans have reservations about proposals to take monies from the bill’s existing conservation agenda to fund climate change priorities of the Progressives. “Farmers are the original stewards of the land,” Mann pointed out. “And they have taken on Mother Nature as a business partner.” Or maybe it’s the other way around.