Opinion: It ain’t going to get any easier for nation’s cash-strapped farmers

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At the end of the day how price discovery works for agricultural commodities at the Chicago Board of Trade comes down to an ever-shifting picture of supply and demand.  If demand is greater than supply commodity future prices rise. If supply is greater than demand commodity future prices fall.

So it's important to pay attention to analysis that attempt to qualify “ending stocks”  – the difference between production (supply) and anticipated purchased (demand) commodities.

If the Organization for Economic Cooperation and Development and the United Nation’s Food and Agriculture Organization are to be believed, U.S. farmers are in for a very, very bumpy ride over the next decade.

The two organizations last month released its latest 10 year projection, suggesting commodity prices will remain at or BELOW current levels. 

The OECD-FAO report paints a staggering list of uncertainties including;

·         Trade tensions brought on by the self-inflicted fight between the U.S. and China.  The report notes “An escalation of ongoing trade tensions has the potential to reduce and redirect trade, with repercussions for international and domestic markets.

·         On the supply side the report indicates the spread of diseases such as African Swine Fever, growing resistance to antimicrobial substances, regulatory responses to new plant breeding techniques and responses to increasingly likely extreme climatic events” add to the risks facing farmers.

·         On the demand side the report highlights what it calls  “evolving diets, reflecting perceptions with respect to health and sustainability issues, and policy responses to alarming trends in obesity.”  African Swine Fever which is obliterating Chinese pig herds may be especially troublesome to U.S. producers in that it is muting soybean demand

·         Bio-fuel expansion which over the last decade have supercharged U.S. corn prices will slow down  “with additional demand coming mainly from Indonesia, using vegetable oil for biodiesel, and China and Brazil, using cassava and sugarcane for ethanol.”

Add it all up and OEDC-FAO predicts that productivity will slightly outpace demand growth.  And that's bad news for farmers who already find themselves strapped for cash.

Digging into the Federal Deposit Insurance Corporation's quarterly report Agricultural Economic Insights reports working capital for farmers has been on the decline since 2012 and have reached levels that are making it more difficult to repay short-term loans. 

Working capital for farmers is currently $38 billion dollars.  But working capital is projected to fall by 25 percent year over year – 2018 to 2019.  That's just slightly better than the 30 percent lost farmers sustained from 2017 to 2018. Ouch!

About Dave Dickey

Dave Dickey

Dickey spent nearly 30 years at University of Illinois at Urbana-Champaign’s NPR member station WILL-AM 580 where he won a dozen Associated Press awards for his reporting. For 13 years, he directed Illinois Public Media’s agriculture programming. His weekly column for the Midwest Center covers agriculture and related issues including politics, government, environment and labor. Email him at dave.dickey@investigatemidwest.org.