Taking a look back at the changes that took place in the ag industry during 2019.
2019 has been quite a year in the world of agriculture. The 2018 Farm Bill and tariff trade wars have farmers and ranchers asking lots of questions. Below are some of the highlights in agricultural commodities, government legislation, and finances for 2019, as well as what to expect in 2020.
Shifts in Supply and Demand of Agricultural Commodities in the U.S.
Between ongoing trade wars, the emerging hemp market, and unpredictable weather conditions, farmers and ranchers are having a hard time forecasting the future of agricultural commodities for 2020.
According to AgAmerica’s chief economist Dr. Penson, soybeans and cotton prices are in a downward trend. While legalization of hemp provides new opportunities for farmers, the future of cotton remains uncertain. The large carryover supply of corn at the beginning of the year kept corn prices steadily declining. However, Midwest rainfall and lower production rates throughout the year appear to have leveled out these prices. The cost of milk has increased as the number of dairy cows has steadily declined.
Opportunities for Nut Tree Farmers
One niche to be on the lookout for in the United States is the nut market. The U.S. continues to be the biggest producer of almonds, harvesting 80% of the world’s crop. As consumption of nuts like almonds, pistachios, and pecans increase, so does the demand. Over 75 percent of pecan production comes from New Mexico, Georgia, and Texas. An estimated 99 percent of pistachios are grown in California, which is also the only state to grow almonds for commercial use.
Agriculture Legislation That Took Effect in 2019
The 2018 Farm Bill went into effect this year, causing a major stir in the agriculture industry. Even though aide programs like the Farm and Ranch Assistance Network seek to help the mental health of farmers, this bill largely provides assistance and subsidies to mega-farms while leaving small, family farms out in the dark. As demand for organic farming grows, this bill offers payment caps and incentives through CSP and EQIP conservation programs. But an estimated $5 billion in long-term cuts to these programs leaves many concerned as to how these incentives will be funded.
How Trade Tariffs Have Affected Global Trade of American Farm Commodities
2018 marked the first year in history that a U.S. president used tariffs as a way to control the flow of trade. As historically important buyers like China look to purchase exports from other countries, American farmers have felt the effects in 2019. The Market Facilitation Program (MFP) has allocated $16 billion to help farms offset some of the impacts of this loss in global trade profits, far exceeding the $9.6 billion from 2018.
Farm Finances: Input Costs Drop While Debt Climbs to an All-Time High
Farmers are spending less on expenses like feed, fertilizers and fuel this year, but more on labor costs, keeping their expenses constant as annual income continues to decline by nearly half each year. Dr. Penson notes that farmland values have seen a slight increase of 1.2 percent from 2018. California, Idaho, and Kansas have experienced the highest increase in farmland values while farmland values in Georgia and Minnesota have decreased the most.
Farm debt hit another all-time high this year at $416 billion, a 40 percent increase since 2012. Big banks like Wells Fargo, U.S. Bancorp and Bank of America have continued to cut agriculture loans, making it increasingly difficult for farmers to allocate cash flow funds through traditional means. This hasn’t stopped the total value of loans from large banks to climb 4 percent over the past five years, particularly on loans for smaller, less-capitalized farmers.
Emerging Agriculture Trends for 2020
Outreach and incentives targeted towards younger farmers who are just getting started seems to be paying off. The number of farmers under 35 is up 35 percent since 2012. The gender gap is also closing as women in agriculture steadily increases, now making up a third of American farmers. Although 97 percent of farms are still family-owned, there is a trend of consolidation as smaller farms are getting squeezed out to make room for big agricultural corporations.
How Farm Consolidation is Affecting American Farm Operators
This ongoing consolidation is leading many smaller farms to think outside of the box in order to survive. Diversification of crops, organic and solar farming are among some of the top strategies these farms are using to stay afloat. From 2011 to 2016 alone, there was a 58 percent increase in organic farming methods. These investments can have a high initial cost but a big payoff later on.
To fund real-estate expansions and modern updates, today’s farmers and ranchers are increasingly steering clear of big bank and traditional loans, instead looking to alternative lending companies that take a customer-first approach and offer custom loan packages to help them thrive in an unpredictable industry.
As a nationwide agricultural lender, AgAmerica has had the privilege of working with multi-generation family farms across the U.S. For these families, land is more than just a job, it’s their family’s legacy and way of life. AgAmerica is proud to offer custom land loans built with flexible financing terms to better serve the long-term needs of family operations.