Quarterly US Rural Economic Review: Rising Output Compressing Agricultural Margins
October 11, 2018
- The escalating trade war with China is the leading risk for U.S. agriculture. Retaliatory actions taken by China and other trading partners have raised concerns of long lasting effects on agricultural supply chains. USDA assistance to farmers and ranchers suffering hardship from the trade war will have only a modest impact on farm financial conditions.
- Despite signs of slowing Chinese economic growth, the world economy continues to expand with momentum likely to continue through 2019. Sustained growth in emerging markets will support increasing demand for higher value products such as animal protein, dairy and specialty crops.
- The U.S. economy remains on strong footing with tax reform and increased government spending providing significant fiscal stimulus. Inflation remains subdued, but with labor markets tightening, the Federal Reserve is likely to maintain a steady path of increasing interest rates through 2019.
- Potentially record yields for U.S. corn, soybeans, and cotton are boosting supplies and limiting price improvement. Global wheat supply concerns have pushed prices higher amid production shortfalls in the EU and FSU regions.
- Record animal protein production and trade concerns continue to weigh on beef, poultry and pork markets. Domestic consumer demand remains stout for animal protein, but pork is experiencing the biggest jolt caused by trade disputes and oversupply.
- Dairy markets continue to show modest signs of improvement, though distress among producers remains, forcing some to exit the business.
- In August, the U.S. EPA proposed the Affordable Clean Energy (ACE) rule to sustain a trend of carbon dioxide (CO2) emission reductions that began in 2005.
The net effect of the ACE rule will have a minimal impact on CO2 emissions for the electricity-generating sector.
- The FCC concluded the Connect America Fund II (CAF-II) reverse auction in August, which awarded $1.488 billion in funding over the next 10 years to expand rural broadband access in unserved areas across 45 states.
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