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Tariffs Slow Export Projections
Friday, February 15, 2019 1:28PM CST
By Jerry Hagstrom
DTN Political Correspondent

SAN DIEGO (DTN) -- So many farmers are dependent on off-farm income in today's economy that lenders say the worst threat to farmers is a general economic recession, the chief economist for the American Farm Bureau Federation said here Tuesday.

"Farm lenders say the reason why we can continue to do what we are doing is off-farm income," Farm Bureau Chief Economist John Newton said during a panel discussion by agricultural economists at the Crop Insurance Industry Convention here.

"It is off-farm income that allows folks to continue to farm. Lenders are really concerned about a slowdown in the U.S. economy," added Newton as he presented statistics on the decline in farm income since 2013.

The general U.S. economy is performing well, Newton said, but he is worried because consumer confidence and the CEO confidence index have both fallen.

Newton said USDA statistics show that in 2018, gross farm income was $435 billion and production expenses totaled $369 billion, resulting in net farm income of $66.3 billion, which was down $57 billion, or 47%, since 2013.

The 2018 figures included $13.6 billion in government payments, up 18% year to year. That included traditional subsidies plus market facilitation payments to make up for trade losses and disaster payment

Net farm income in 2018 was the third lowest over the last 20 years in inflation-adjusted terms, with income down in all regions of the country, he said. Without the government payments, it would have been the lowest net farm income of all time, he added.

President Donald Trump has tried to address the trade deficit that has grown since the approval of the North American Free Trade Agreement and China joined the World Trade Organization, but that has created "headwinds" for the farm economy and could hurt the overall economy, Newton said.

"No commodity exemplifies what has happened more than soybeans," Newton said.

The tariffs that China imposed on U.S. soybeans and other farm products in retaliation for the tariffs that Trump imposed on foreign steel and aluminum "deeply impacted" the 10-year export sales projections that USDA had made in 2018, said Ashley Hungerford of the USDA Office of the Chief Economist,

Hungerford noted, "Nobody wins in a trade war, which is the motto of most economists," as she pointed to a graph displaying USDA's original and revised projections for export sales.

Soybean stocks-to-use ratios are now so high that USDA has projected it will take several years to "unwind" or sell off those stocks, which means soybean prices are likely to be low.

Hungerford pointed out that the stocks-to-use ratio was only 5% when China imposed the tariffs on U.S. farm products and is now about 20%.

"For every five bushels of soybeans used, one bushel is left over," she said.

The cash price that farmers get in areas such as the Dakotas that were dependent on exporting soybeans to China have gone down in relationship to the futures price compared to the prices that farmers are getting in areas where soybeans are sold for domestic use, she said.

Soybean exports are 40% below previous levels, and the soybean stocks-to-use ratio of over 20% is unprecedented.

"If we don't see a resolution to [the China trade conflict]," Newton said, "I don't see how soybeans can maintain the price they have today." The soybean price, he said, may be $7 to $8 per bushel, not the $9.50 price of today.

Farm debt is at a record level of $410 billion, Newton said. The debt-to-asset ratio is not as high as it was during the farm crisis of the 1980s, he said, but it is at 13.5% and has been rising for the last six years.

USDA has projected net farm income slightly higher for 2019 at $77.6 billion, but it has not provided details of how it came up with that estimate, and it is hard to put projections on 2019 income because it's not known what farmers will plant or what the weather will be like, he said.

"It is a really, really challenging time for U.S. agriculture," Newton said. "We are taking equity out of our operations."

Jerry Hagstrom can be reached at

Follow him on Twitter @hagstromreport


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