There were signs of optimism for the U.S. economy and agriculture as 2020 began, CoBank’s Knowledge Exchange Division said in its Quarterly US Rural Economic Review.
“Optimism over the phase one China deal should benefit producers, input suppliers and exporters alike,” CoBank said, which also saw the animal protein sector benefiting from the deal. Cobank also expects increased U.S. corn and soybean plantings and higher milk prices in 2020, while winter wheat seedings are seen at historic lows.
“The fourth quarter is ending with much more optimism on trade and the economy compared to how it began,” CoBank said, noting a year-end “blitz” on trade (including a phase one deal with China and advancement of the US-Mexico-Canada Agreement), immigration reform and agricultural labor. “All three policies would be significant milestones for the US economy, rural economy and the agricultural sector.”
CoBank noted that while yet to be proven true, indications that China agreed to buy $40 billion annually in US agricultural goods would provide widespread benefit for US agriculture “as soybeans would account for only a small portion of the increase.” “We expect China to continue to issue more tariff exemptions to its agricultural importers, making purchases of U.S. goods more cost effective,” CoBank said.
The U.S. economy continued to “hum” along going into 2020, benefiting from the Federal Reserve’s three rate cuts in 2019, 50-year low unemployment, wages outpacing inflation, strong housing prices, strong consumer spending and the “wealth effect” of record highs in equity markets, CoBank said.
“The current strength of the economy, however, is precarious in the sense that it is almost entirely dependent on consumers,” CoBank said. “Businesses have not been investing in capital goods, and corporate revenue growth has slowed while labor costs continue to climb higher.”
On the agricultural side, CoBank said inclement weather in 2019 had wide-ranging implications for crop prices, basis levels and crop quality.
“Despite the extreme weather and price volatility, corn and soybean prices ended nearly unchanged for the fourth) quarter,” CoBank said.
