Agricultural economic outlook tied to pricing, trade agreements
Commodity prices, COVID-19 and trade agreements are three of the top subjects shaping the farm economy outlook in 2021.
Three American Farm Bureau Federation economists presented their top topics influencing commodity prices, livestock markets and overall farm policies during a Jan. 11 presentation at the organization’s virtual convention.
During the “2021 Farm Economy Outlook” workshop, AFBF livestock economist Michael Nepveux said, “China is the big elephant in the room.” Before the swine flu reduced China’s hog herds in 2018, the country accounted for half of the world’s production and consumption of pork, he noted.
Since then, U.S. pork, beef and poultry exports to China not only rebounded, but also experienced significant increases in 2020. The question Nepveux posed is whether those exports will continue to increase under the new administration.
Shelby Swain Meyers, an AFBF crop marketing economist, added that China has become one of the U.S.’s top small grains importers as well. “China is returning as a demand partner for U.S. commodities.”
Dr. John Newton, chief economist for AFBF, said that under the Phase One trade agreement with China, $22.5 billion in U.S. agricultural products were exported in 2020. He expects that figure to reach more than $40 billion this year.
But the unknowns regarding trade include President-elect Biden’s views on trade with China, and whether the U.S. will rejoin the Trans-Pacific Partnership. Newton said that when former President Obama negotiated the TPP, it stood to boost net farm income by $4 billion.
He also noted that the majority of U.S. agricultural trade is with North America, China, Japan and South Korea. There is limited U.S. trade presence in the European Union, Africa and South America. “Do we focus on bilateral or trilateral agreements?” Newton asked.
In looking ahead, he added that the agriculture and food service industries won’t turn the corner from the effects of COVID-19 until mass vaccinations are available. Farmers were helped by over $45 billion in ad hoc support from the federal government through programs like the Coronavirus Food Assistance programs and the Market Facilitation Program. This money helped farmers offset the effects of retaliatory tariffs and pandemic impacts.
For 2021, however, Newton said there is much less federal funding available to help farmers. He said $13 billion recently was approved for the agricultural sector. Farmers who will benefit include row crop producers, cattlemen, contract poultry and livestock producers and dairy farmers.
Newton said AFBF will lobby for strengthening the federal farm bill. “The current safety net is not adequate enough to help farmers,” he explained, saying AFBF needs to communicate the importance of the farm bill to the new administration.