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The Economic Radar Screen

Dr. David Kohl, Professor Emeritus Agricultural and Applied Economics, Virginia Tech University

The days are getting shorter and the fall and winter seasons are just around the corner. What is on the Globe Trotter's economic radar screen? Each of the following variables, or a combination of variables, can have an impact on agricultural income statements and balance sheets, both in the short- and long-run. The following are not in order of importance.

The phase one trade deal with China and subsequent global trade pacts could be game changers in the next year. Heavy rains in China have disrupted food supply, which has provided temporary gains in some of the U.S. agricultural commodities. Trade will be in a state of flux throughout the globe, creating volatility. Focusing on disciplined marketing and risk management plans is a high priority for producers.

Next, look at the economic health of the U.S. agricultural trading partners, specifically, Canada, Mexico, Japan and southeast Asia. Economic and political turmoil is occurring in Canada and has resulted in the resignation of top-level officials. Mexico is now in the top five countries for COVID-19 cases, which is hindering its economic recovery efforts. Japan’s Prime Minister’s recovery plan has been pushed back at least two or three years, which impacts global trade, particularly with the United States.

Government supports to agriculture are not only occurring here in the United States, but globally. Over $2 billion per day of aid is being extended globally to agriculture. How will these supports be withdrawn over the coming months and years? Will competing governments be able to continue the money flows to their agriculture industries? What are the other competitive sectors within a country that may need stimulus packages? The answers to these questions will impact the economic landscape of agriculture in both the short- and long-run.

Will there be a shift of population from urban to rural regions? How will this movement impact rural communities, as well as farm and ranch land values? Will uncertainty in the economy and stock market in addition to low interest rates continue to create stability in farm and ranch land values in most areas of the United States?

Finally, up to 50% of farms and ranches are supported by nonfarm income, which often includes retirement benefits and medical insurance. A certain segment of the population will see higher unemployment rates continue along with the possibility of earning only 50-75% percent of their pre-COVID-19 income. 

The radar screen will have many blips impacting certain regions and industries. It is going be interesting to watch what new blips appear in the fall and winter seasons.

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