AFBF’s chief economist provides economic overview of 2020
“It has been a pretty challenging couple of years. In 2019, we had a lot of producers across the country who were unable to get a crop in the ground due to excessive flooding. Then, this year, we saw fires raging across the West, hurricanes in in the Gulf Coast and a global pandemic. There is also no secret we had a tough go on the trade front,” stated American Farm Bureau Federation’s (AFBF) Chief Economist Dr. John Newton.
Newton, among other AFBF personnel, presented during the Wyoming Farm Bureau Federation’s (WyFB) 101st annual meeting held in Casper on Nov. 12-14. During his presentation, Newton provided attendees an economic overview of the year 2020.
To begin, Newton explained beginning-of-the-year production estimates were very strong.
“Poultry production was expected to climb one percent to 45.5 billion pounds, pork production was expected to jump four percent to 29 billion pounds, beef production was expected to grow one percent and we also expected record dairy production,” Newton stated.
“There was a really strong sense of optimism at the beginning of the year, but the light at the end of the tunnel actually turned out to be a freight train,” he added.
In fact, due to market disruptions caused by the coronavirus pandemic, year-over-year beef and pork production fell nearly 34 percent during the spring months. Despite this, Newton said production has rebounded and ultimately kept pace with year-ago levels.
“We are currently sitting on the highest number of cattle on feed we have ever seen for as long as we have been reporting numbers,” he noted. “We have a lot of heavy animals that were kept on feed for longer than 120 days because we didn’t have hook space at the plant for them. In fact, steer dress weights are nearly 26 pounds heavier than last year and dress weights for barrows and gilts is heavier than the historical average.”
Newton continued, “Even though slaughter numbers are lower than last year’s, production is keeping pace with year-ago levels because of this backlog in heavy animals.”
Newton noted the immediate impact of commodity prices following COVID-19 disruptions was significant and rapid.
“During the shelter-in-place orders, there were significantly less people out driving, and gasoline demand fell sharply. We blend about 10 percent of ethanol into our gasoline, so ethanol prices fell seven percent,” he explained. “As a result, the feed stock from these ethanol plants – corn, grain and sorghum – fell sharply in some parts of the country as well.”
Due to the backlog in market ready animals, feeder cattle and hog prices also fell sharply, at 30 and 50 percent respectively, according to Newton.
“Prices for shelf-stable products climbed,” he said. “In fact, we saw rice prices rise by as much as 70 percent.”
“Dealing with COVID-19 domestically was certainly a challenge, but it also created quite a challenge for us internationally as well,” Newton stated, noting a few of the United State’s top export markets have been down.
He pointed out exports to Mexico fell by $1.4 billion, exports to Canada fell $320 million, exports to the European Union and United Kingdom are down $145 million, exports to Japan are down $505 million and exports to South Korea fell $145 million.
“A bright spot in terms of ag exports has been the increase in purchases from China, which is up $3 billion,” Newton said. “This comes on the back of the Phase One Trade Agreement, which has China slated to purchase nearly $36 billion in agricultural products in 2020.”
Newton noted a recent report was issued from the U.S. Trade Representative, which suggests China will likely only meet about 70 percent of their purchase commitment this year, but trade with China is still on the rise.
Newton pointed out Congress and the Trump administration have done a fairly good job at setting aside money in an effort to stem some of the financial heartache producers around the U.S. felt in the wake of the coronavirus.
“The Coronavirus Aid, Relief and Economic Security (CARES) Rescue Package was a $2 trillion package, $23 billion of which was set aside for ag producers with another $24 billion set aside for commodities and nutrition programs,” he said. “The U.S. Department of Agriculture (USDA) took the $9.5 billion given to the secretary’s office and created the Coronavirus Food Assistance Program (CFAP).”
Newton explained AFBF, WyFB and many other state farm bureaus worked hand-in-hand to highlight the current financial needs of agriculture producers, and the final payout of the first round of CFAP totaled $10.3 billion.
“In July, the Commodity Credit Corporation received a $14 billion replenishment. USDA took this money and created a second round of CFAP (CFAP 2), which provided support for several products that weren’t eligible for the first round of funding,” Newton said.
“Additionally, two trade assistance packages totaling $28 billion were released to help producers impacted by retaliatory tariffs from China,” Newton added.
He continued, “Since 2018, $33 billion has gone out, which is unprecedented. This doesn’t include the $14 billion set aside for CFAP 2, any loans forgiven under the Paycheck Protection Program or $6 billion for Wildfire and Hurricane Indemnity Program Plus. This means more than $40 billion in Ad Hoc Support has gone to the ag sector over the past year.”
Hannah Bugas is the managing editor of the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.