Looking ahead into 2020, the Purdue University Agricultural Economics department said in an extensive outlook report that several issues will hold over from this year into next, providing uncertainty for farmers and ranchers.
The outlook focuses on Indiana agriculture, but there are many parts of it that can apply to individual growers and livestock producers across the country. This space will bring several of the areas out for the edification of readers over several days since the whole report is too long to be presented in one piece.
QUICK OVERVIEW
This year brought many challenges to farmers, weather being at the top of the list, Jayson Lusk, head of the Department of Agricultural Economics, said. Rain and flooding affected the ability to get into fields and led to difficult decisions about whether to delay planting or take prevented planting insurance.
The result was a late harvest for Indiana, yet only modest price gains across the country.
Looking ahead, uncertainty continues in the area of trade policy and the macroeconomic environment, Lusk said. African Swine Fever in China is, and likely will continue to have, major effects in global markets.
As a result of ASF and other factors, global food prices are rising, although domestic food price inflation was expected to remain low, he said.
US ECONOMIC EXPANSION SHOULD CONTINUE
Larry Deboer, Purdue University agricultural economist, said the US’ current expansion in Gross Domestic Product, which began in 2009, should continue.
There was no recession in the 20-teens, the first such decade in US history, Deboer said. Unemployment dropped to 3.5% last month, the lowest level in more than 50 years.
In addition, inflation remains low at 1.8%, with the core rate excluding volatile oil and food prices was only 2.3%.
YET, THERE ARE CONCERNS
Yet 2019 had its concerns, Deboer said. Real output growth fell to a disappointing 2%, its average during this expansion, after nearly 3% growth in 2018.
Manufacturing employment declined, and financial markets were unsettled, Deboer said. The yield curve inverted, which often predicts a recession, and the Federal Open Market Committee reversed course and began cutting the core Fed Funds rate.
And real GDP growth now is being hampered by production capacity, Deboer said. And this is a problem since increased consumer spending won’t add much to output at capacity.
And, while consumer spending continues to grow, business investment has declined over the last two quarters, Deboer said. Possible reasons include a drop in durable-goods orders, uncertainty about trade policy and a lack of exciting investment opportunities.
The trade war has taken a toll on exports and imports, with exports down more than imports, Deboer said.
But if a recession is avoided next year, and the expansion moves into its 12th year, real GDP could grow at a normal 2.2%, Deboer said.
CATTLE, BEEF RECAP
Cash cattle trading took place last week at mostly $122 per cwt on a live basis, up $1 to $2 from the previous week. Dressed-basis trade happened at $195 to $196 per cwt, up $3 to $4.
The USDA choice cutout Friday was down $1.19 per cwt at $208.96, while select was down $0.68 at $204.57. The choice/select spread narrowed to $4.39 from $4.90 with 75 loads of fabricated product sold into the spot market.
Nine steer contracts were tendered for delivery against the Dec live cattle futures contract on Friday. There were no demands.
The CME Feeder Cattle index for the seven days ended Thursday was $144.61 per cwt, down $1.20 from the previous day. This compares with Friday’s Jan contract settlement of $145.55, up $0.10.