Quarterly Economic Outlook - Trade War Prospects Weigh Heavy On Rural US

Despite the challenges, there are abundant opportunities for U.S. agriculture this year amid drought in South America and growing export prospects; however, those opportunities are at risk according to the latest Rural Economic Review from CoBank’s Knowledge Exchange Division.

“Optimism over global economic growth in 2018 remains high, but it is clear that downside risks to growth far outweigh the likelihood of upside surprises,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange Division. “We are looking at 4 percent global growth, the highest since 2011 - developed countries such as the U.S. are providing the global stimulus needed for that growth - but trade concerns now put that at risk.”

Automated Milking Systems Slowing Farm Consolidation

Various forms of robotic milking are helping sustain small to medium sized dairy farms amid broader industry consolidation and improving labor efficiency for some larger operations according to a new report from CoBank’s Knowledge Exchange Division.

Dairy robots, also referred to as automated milking systems, take a variety of forms. From “box” style units to robotic components on rotary style milking parlors, they all provide an alternative to traditional dairy labor, which has become more expensive and harder to find in many regions of the U.S.

“Labor and finance are two of the most important issues when large farms are considering dairy robotics, but when I spoke to smaller-scale producers, the primary drivers of adopting this technology were around quality of life,” said Ben Laine, senior analyst with CoBank. “However, the future growth of this technology and possible broader adoption will be centered on labor costs, milk production per robot, and proximity to dealers and service technicians.”

Battery Storage Capacity For Electric Distribution Coops To Take Off In Next Year

The future is bright for electric distribution cooperatives in battery energy storage according to a new report from CoBank’s Knowledge Exchange Division. The entire battery storage market could grow from $300 million a year to as much as $3 billion by 2020, and electric distribution cooperatives are well positioned to own a share of this growth and move battery technology forward.

The battery energy storage industry, where growth is dominated by lithium-ion technology, is undergoing significant expansion leading to economies of scale for the manufacturing of cells and battery packs. This translates to lower capital costs for stationary systems which could drop below $300 per kilowatt hour this year. 

“The landscape for battery storage is rapidly evolving across the U.S.,” said Taylor Gunn, lead industry economist with CoBank. As costs fall, interest in lithium-ion batteries is spreading to electric cooperatives outside Alaska and Hawaii. “After multiple interviews with managers and CEOs of electric distribution cooperatives, we found that there are clearly defined use cases, such as reducing peak demand, that are driving growth in the electric cooperative space.”

CoBank Reports Full Year Financial Results for 2017

CoBank today announced financial results for the full year and fourth quarter of 2017.

Average loan volume for CoBank increased 5 percent to $96.0 billion, reflecting increased lending across all three of the bank’s operating segments. Net interest income increased 2 percent to $1.393 billion, driven primarily by higher average loan volume. Net income for 2017 rose 19 percent to $1.125 billion due in large part to recently enacted federal tax reform legislation. Excluding the impact of tax reform, net income rose 4 percent to $983.0 million from $945.7 million in 2016, due to the combination of greater net interest income and a lower provision for loan losses.

“We’re pleased with our financial performance for the year, which reflected solid organic growth in our business as well as an unexpected benefit from the new tax law,” said Thomas Halverson, CoBank’s president and chief executive officer. “Despite ongoing challenges in the financial services industry as well as many of the rural industries we serve, we ended the year in strong financial condition and well-positioned to continue fulfilling our mission in rural America.”

International Joint Ventures In Dairy Pick Up Steam

As the dairy industry evolves and modernizes, dairy companies across the U.S. are looking to capitalize on increasing milk production through international joint ventures with companies that have significant manufacturing, networking and marketing expertise, according to a new report from CoBank’s Knowledge Exchange Division.

While the U.S. has heavily invested in milk production, Europe and other regions that faced production constraints focused their effort and investment on technology for the processing sector. In 2017, many U.S. dairy companies and international partners collaborated to capitalize on each other’s strengths.

“The international dairy industry sees the U.S. milk supply as strong and reliable and they see opportunity in the U.S. consumer,” said Ben Laine, industry analyst with CoBank.