Soybeans are the Proverbial Canary in the Coal Mine for Crop Farmers- KC Fed Official Says Critical Marketing Period Ahead for the CropThu, 18 Oct 2018 04:41:33 CDT
The economic well being of farmers and ranchers has been sliding downward over the last five years- that was the message delivered to the the 2018 Oklahoma Rural Economic Conference on the campus of Oklahoma State University on Wednesday. Nathan Kauffman of the Omaha branch of the Federal Reserve Bank of Kansas City told ag producers and many lenders who work with the farm and ranch community that "the concern has been intensifying over the last five years- it's been relatively gradual but it has been what I would describe as a prolonged downturn in agriculture." He pointed to both strong production in two of the major US crops- corn and soybeans- and the fate of soybeans as they sit in the middle of the trade war battleground between the US and China.
While Oklahoma is not a major producer of soybeans, Kauffman told Radio Oklahoma Ag Network Farm Director Ron Hays after his presentation that soybeans in the big picture can impact the economic impact of many other crops- including those grown in Oklahoma. "Soybeans will compete for acres of other types of crops- so you tend to see a pretty strong correlation in commodity prices when the price of one major commodity changes- it typically is tied to prices of other commodities." He believes that the tariff war with China has left soybeans very vulnerable heading into the time of the crop cycle when much of the crop annually is sold into the export market. Summer export sales of soybeans were actually higher this year than normal- but with China buying few if any US Soybeans this fall- it remains to be seen if other countries and regions will fill in the gap and buy larger quantities from American farmers.
While the financial fortune of crop farmers is in a precarious state- Kauffman says things are not as bad in the livestock sector- at least not yet. "It's been a little more optimistic in the livestock industry than what it has been on the crop side- a lot of the concerns in agriculture- at least the last year or two have been on the crop side." He credits a good bit of the livestock sector optimism to the global economy- that "the global economy has been doing pretty well- and that if the global economy is doing well- that typically means strong demand for meat products- and we have been seeing that in a global sense."
Kauffman warns that ag producers may be facing some interest rate headwinds as the overall economy continues to improve and interest rates gradually go higher. Those farmers who are most heavily leveraged will be the ones most vulnerable as the economy heats up.
In an interview that covered both the general economy and the current and future status of the rural economy- Kauffman spoke with Hays and AFR's Sam Knipp after addressing the Rural Economic Conference- click on the LISTEN BAR below to hear his comments.
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