As 2019 crops up, let’s reflect on the past year in agriculture and what is to come in 2019.
This past year, the agriculture industry was affected by significant changes that occurred in government such as, the United States (U.S.) entering into a trade war with China, Mexico, and Canada – placing tariffs on various exports – and the Farm Bill expiring on September 30, 2018.
Additionally, natural disasters impacted the agriculture industry across multiple states in 2018. September’s Hurricane Florence and October’s Hurricane Michael delivered devastating hits that resulted in financial losses for farmers, with Hurricane Florence causing crop damage and livestock losses of more than $1.1 billion in North Carolina and agricultural damage from Hurricane Michael topping $1.3 billion across Georgia, Alabama, and Florida. Moreover, California experienced the most destructive wildfire season on record with 7,579 fires burning more than 1.7 million acres – the largest amount of burned acreage recorded.
National net farm income took a hit in 2018, too, according to USDA’s Economic Research Service (ERS) as reported by the Congressional Research Service. National net farm income – a key indicator of U.S. farm well-being – is forecasted at $66.3 billion in 2018, down more than $9 billion from 2017.
However, farm wealth is up 1.4 percent from 2017 to $3 trillion, and farmland values are up 1.9 percent in 2018 following a 2.3 percent rise in 2017. Plus, the total farm sector gross cash income for 2018 was $423 billion – that’s a 1.5 percent increase – due to increases in government payments and farm-related income. Moreover, cash receipts from crop and livestock production increased 0.7 percent in 2018 to $374.9 billion.
Corn and soybeans remained the two largest U.S. commodities in 2018 in terms of both value and quantity, and for the first time, U.S. soybean plantings, at 89.145 million acres, narrowly exceeded corn plantings (89.140 million acres).
Unfortunately, both the soybean and dairy industries suffered in 2018 due to the U.S.-China trade war. According to government figures, U.S. shipments of soybeans to China fell by about 62 percent in the first 10 months of 2018, and U.S. suppliers saw sales of cheese to China plummet 59 percent in October after a 63 percent decline in September. The nation’s dairy industry is also facing over-production issues, with approximately 1.4 billion pounds of cheese in cold storage at the end of 2018.
On the upside, the nation’s cattle herds continued to expand in 2018, along with U.S. hog and poultry flocks. Cattle and calf sales totaled $66.4 billion in 2018, hog sales reached $20 billion, and poultry and egg sales were $46.7 billion.
Predictions for the Ag Industry in 2019
Successful Farming predicts that 2019 will bring even more corn – in fact, the news outlet expects about 3 million acres of U.S. crop production to shift to corn this year, which should result in a 15-billion-bushel corn crop and record-setting corn production across the world. In addition, Successful Farming predicts corn prices will improve to around $3.90 a bushel in 2019, thanks to three consecutive years of strong international demand.
Another prediction for the new year, will be the continued shift in trade partners due to the ongoing trade war. Other countries have retaliated with tariffs of their own – particularly China – and as a result, the U.S. has doubled sales to Mexico and the European Union in the past year, comprising our top two export markets. Moreover, Argentina – who never imported soybeans from the U.S. previously – is now our third soybean export market. According to Lee Schulz, a livestock economist with Iowa State University, the U.S. will remain very competitive with the world market, even with the invoked tariffs rates.
The newly approved, $867 billion 2018 Farm Bill (also known as the Agriculture Improvement Act) will impact the agricultural landscape in 2019. According to AgWeb, the agreement reauthorizes and strengthens the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) options through 2023, includes existing disaster programs, as well as several improvements to U.S. farm policy.
The 2018 Farm Bill also improves the dairy safety net by introducing the reinvention of the Margin Protection Program for dairy producers, boosting coverage levels and reducing premiums. The new bill also includes a revised Animal Disease Prevention and Management Program that provides annual funding for three animal health programs. This includes a new vaccine bank focused on foot-and-mouth disease, and extended funding of the National Animal Health Laboratory Network to protect U.S. borders and improve food safety.
Additionally, hemp production has been legalized, which was formerly restricted for research and pilot programs use, creating a new revenue-generating opportunity for farmers. The legalization of hemp cultivation could become a catalyst for major growth in a burgeoning industry that some experts say could top $20 billion by 2022.
As 2019 unravels and the agriculture industry continues to evolve, its important you are prepared for unexpected changes, having a financial plan in place to position your operation for long-term success.
If you’d like to discuss the financial future of your operation, contact our professionals today at email@example.com or 844.516.8176.