Q4 2019: Trade Remains the Focus as Tariffs Take Toll on Agriculture

October 2019 - Dan Kowalski, Tom Binet, Crystal Carpenter, Tanner Ehmke, Jeff Johnston and Will Sawyer

Key Points

In this issue

  • Trade tensions continue to mount as global economic growth slows. The U.S. economy remains on much better footing, largely due to solid wage growth and consumer spending.
  • Soybean prices surged late last quarter based on fears of delayed maturity of the U.S. soybean crop and hopes of resuming China market access. Ethanol producers are dialing back production after contending with negative margins, trade issues, blending waivers, and volatile corn prices.
  • Cool spring weather lifted livestock weights, driving increased protein supplies this summer. Trade volume is expanding and U.S. meat and poultry producers will soon see the benefits. Dairy cow numbers are down 82,000 head year-over-year, weighing on total U.S. milk production.
  • Foreign buyers are defaulting on cotton contracts after prices dropped significantly in recent months. Rice prices have surged in the last quarter and shipments to Mexico alone are up 45% so far in the marketing year.
  • Total shipments for the 2018-19 almond crop year finished strong despite the trade headwinds, bringing ending stocks to their lowest level since 2012. Prices for process oranges and wine grapes are expected to be soft over the next quarter due to increased production, weak domestic demand, and ongoing trade issues.
  • Moderate natural gas prices are likely to put downward pressure on power prices nationally while driving the continued retirement of less-efficient generating capacity.
  • With most large fiber optic transport companies already acquired, institutional investors are eyeing fiber-rich rural operators as their next targets.

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