The farmers are restless.
For a second consecutive month, the Purdue University-CME Group Ag Economy Barometer plummeted, reflecting extreme consternation in the agricultural community about the state of the US economy and the impact of coronavirus on their operations.
The index’s decline over the past two months marks a stunning fall from grace. At 96, the gauge is 72 points from its record high set in February. April’s reading marked the first sub-100 print since October 2016. The slump “effectively wipes out all of the improvement in farmer sentiment that took place following the 2016 election”, Purdue notes.
The latest survey was conducted from April 19 through April 24.
COVID-19 dealt a generalized shock to the food supply chain, and there’s been no shortage of headlines about surging beef and pork prices as a result of shutdowns at meat processing plants across America.
Some argue that’s a preview of what’s coming. This is part and parcel of a spirited debate over whether the current circumstances are conducive to an outright deflationary spiral or just a setup for the return of inflation in the developed world sometime down the road.
As you ponder this (and as you peruse whatever scant selection of suddenly expensive meat is available at your local chain grocery store) don’t lose track of the fact that, in the near-term, we’re experiencing the biggest demand shock since the Great Depression. While you may be paying more for beef, the deflationary side of this crisis is manifesting in all manner of ways.
“The fallout of the deadly virus is creating a domino effect, hitting everything from corn to soybeans”, Bloomberg’s Isis Almeida wrote, in a piece out late last week. “With drivers off the roads, corn demand to make ethanol has plunged, while US meat-plant shutdowns are forcing farmers to cull their animals, which erodes demand for feed inputs like soy”.
This is a big reason why farmers are feeling so down on their luck.
“Underpinning the rise in pessimism among farmers was a precipitous decline in principal commodity prices over the last couple of months”, James Mintert and Michael Langemeier, from Purdue’s Center for Commercial Agriculture, said Tuesday, adding the following:
When asked to compare their farms’ expected financial performance in 2020 to 2019, 55 percent of respondents in the April survey said they expected worse financial performance in 2020 than in 2019, which compares to 40 and 30 percent of respondents who felt that way when surveyed in March 2020 and December 2019, respectively.
The current conditions index on the Ag Economy Barometer is now at just 72 after a 39-point drop in April. The two-month decline there is 82 points.
Obviously, this is just insult to injury. Farmers have repeatedly given Trump the benefit of the doubt despite the likely irreparable harm done by the trade war.
The White House touts its farmer bailouts, but those programs were widely criticized for funneling money to the largest (i.e., richest) farmers and for being discriminatory towards minorities (not necessarily on purpose).
Some of America’s farm families have been driven to the brink of abject poverty, partially as a result of Trump’s quixotic crusade to rewrite the rules of global trade and commerce. Sadly, many still say they’re willing to sacrifice their own livelihoods if it means helping Trump “win” what they do not understand is an unwinnable war.
Now, renewed tensions between Washington and Beijing over the source of the coronavirus threaten to once again upend trade between the world’s two largest economies, to the detriment of US agriculture.
In the latest Purdue survey, two-thirds of farmers said they were very worried or fairly worried about the impact of coronavirus on their farms’ profitability this year and more than half said they expect to apply for one of the government’s coronavirus financial assistance programs.
Trump, meanwhile, is still selling green “Make Our Farmers Great Again” hats on his official website. They are “proudly made in the USA”, sport a “plastic snap enclosure” and cost $45 each.
A poll I saw last night had Trump leading Biden by 2 points in Iowa. How in the hell can that be? People voting against their own interest get what they deserve.
And $45 for a cap that looks like an equivalent John Deere cap sans logo that elsewhere sells for $15. Somewhat insulting to John Deere.
Just looked at the DBA chart back to 2007. Feel bad for independently run farm operators trying to make a go of it.
That’s exactly what it is. He ripped off the Deere hat, then tripled the price. Which, I mean, is exactly like what you’d expect he would do when pondering how to go about making a MAGA line for farmers.
In the 70s80s 90s Union members voted anti-union for moral reasons(or so it seems to voters). People vote something they can have an opinion on in a simple way. At some point the only opinion is the checkbook. I was thinking Trump wanted new tariff money so he could finally get around to paying them off. This will play into some States getting monies. The numbers in the last trade bill never made sense to me ,it was a truce. Way things are now he make be stuck with the deal. Even Jim Cramer told him don’t you dare tariff. He mentioned and backtracked blocking Euro imports. He may have planned on lots of tariff money from everywhere spread out as need be before the election. Not a bad business plan if all you care about is a win.Bulk of the money comes from consumers who do not vote him anyhow.
Eventually bad policies and poor governance come back to bite incumbents. An unpredictable virus also brings a lot of uncertainty as well. I am not writing off trump yet; however, the spread of outcomes now looks like 1/3 chance trump squeaks by, 1/3 chance biden wins a close election, and 1/3 chance that trump loses in a blowout and takes the GOP down with him- Senate GOP losses could be in the double digits in that scenario- think politicos like McConnnell, Cronwin (TX sp?), Joni Ernst, Loeffler in Ga., Lindsay Graham, and a bunch of others you would not expect. This presents a wide divergence of outcomes in both politics and economics which is why it is so hard to invest with longer than a one week time horizon right now.
“I’ll take door no. 3, Monte.”
RIA, I used to agree with your main premise, which would make your stated probabilities reasonable.
However, over the last 12 years, I have learned not to underestimate the power of widespread ignorance and small-mindedness.
Despite everything that’s going on, November will be a coin toss.
Harvey Dent would love it…
If it’s a toss-up that speaks volumes about the intelligence of at least half of the American voters. (And it’s a reflection of the American school system.)
Man of Lourdes: Yes agreed. Notice that I did describe the ignorance and small-mindedness as “widespread”. #MAGA
George Carlin: “Never underestimate the power of stupid people in large groups”