CA: Trade, Farm Bill and Water Topics for Fresno State Agribusiness Conference

DR TERRY BARR, Senior Economist CoBank

In what might be the understatement of the year, Dr. Terry Barr of CoBank asserted today’s low commodity prices “are not comfortable for most producers, given their cost structures.”  With the cost of inputs increasing along with energy, labor and interest rates, Dr. Barr raised the specter of a “new normal” in farm prices.  A senior ag economist at CoBank based near Denver, Barr has delivered the opening presentation for several years at the Agribusiness Management Conference organized by Fresno State’s Jordan College of Agricultural Sciences and Technology.  This year the 37th annual event was held Nov. 8 in downtown Fresno, Calif.

In his discussion, he set the stage for the day with an overview of the economic outlook for all of U.S. ag both domestically and internationally.  He showed how ag has endured volatility during the past ten years that parallels energy, recovering from the financial crash of 2008.  During these years, much of agriculture has moved into export markets which has   He said ag is much more linked to exports to Asia and the world economy which has “changed the market dynamics” of many ag companies and commodities.

Speaking about China as the biggest market, he confirmed there is a significant amount of uncertainty for trade.

“One of my greatest concerns is the view of the U.S. as a reliable supplier for the global supply chain.  We may be doing significant damage,” he said.

For Dr. Barr, the top issues internationally are:

  1. The uncertainly of U.S. trade policy… “we are the epicenter of uncertainty.”
  2. The future of the European Union and what effect the departure of Great Britain… “Brexit”… will have.
  3. China is the centerpiece for global growth but growth has slowed down there.
  4. Emerging markets depend on trade and their economic growth has slowed down in the fact of trade disruptions.
  5. Trends towards “anti-globalization” along with geopolitical cyber-security
  6. Oil price volatility… although the U.S. has become a dominant supplier and he predicts oil prices ranging from $55 to $75 per barrel.
  7. The value of the world’s currencies in the face of central bank policies
  8. Global debt. The global economies are “addicted to debt” and he included the U.S. that characterization

In the U.S. he pointed to 43 consecutive quarters of growth, not the longest expansion but close, and he does not predict a recession at least not before 2020.

“This is a strong economy,” he said, with wage rates beginning to pick up, auto sales that should remain steady as the U.S., the housing market has recovered since the recession and business investments are up sharply, with the tax cuts a factor.

The biggest challenge will be the budget deficit, driven in part by the retirement of the baby boomers… 10,000 people per day are going into Medicare.

In the ag economy, changing technologies and mega-mergers are consolidating the supply chain.  He pointed out that at the farm level, 10% of the operators account for 85% of production.  This will require a log of restructuring and there will be a lot of change.

He points to a global growth rate of  3 ½ to 4%, continued strength in emerging markets which is good for ag, and the transition of China’s economy from one based on exports to one based on consumer spending.  He readily acknowledged the current trade uncertainties and market access challenges.  Summing up, Barr characterizes his outlook at “cautiously optimistic.”

What About the Farm Bill and USMCA?

DR STEPHANIE MERCIER, Senior Fellow Farm Journal Foundation

Two speakers gave their perspectives on the Farm Bill and other ag policy issues.  Dr. Stephanie Mercier of the Farm Journal Foundation described the many of the specifics, presenting detail of the outstanding issues dividing the House and Senate as well as the two parties.  She said it was not a certainty the Farm Bill will be enacted nor will there be an extension if it doesn’t.

She also reviewed the new trade agreement with Mexico and Canada saying there will not be a great deal of change in the ag export opportunities.  She did point out the adjustments in opportunities for dairy and poultry to slightly increase market share and a change in the rules for wheat allowing U.S. product to be used in foods, not just animal feed.  The total impact for these three commodities could be as much as $450 million once the agreement is fully implemented, she said.

The biggest negatives on ag trade now are the retaliatory tariffs on U.S. farm products in China and several other countries, notably Mexico and Canada.  Her Foundation’s studies showed a negative impact on ag in just our two neighbors being $1.8 billion annually, exceeding the benefits of USMCA.

JAMES JOHANSSON, President Calif. Farm Bureau

Speaking from the point of view of an ag advocate, James Johansson as president of the California Farm Bureau Federation described the efforts of his organization to obtain support in Congress.  He reviewed Farm Bureau positions on several items and recounted the reactions of legislators both positive and negative.  An olive grower from Butte County, he acknowledged his neighbors being affected by the Camp fire which was only it its early stages that day.

A big challenge working with midwestern Congress members, he said, is the size, scale and variety of California agriculture.  Whether its dairy issues, crop insurance or even trade, those from areas with smaller farms or reliance on single commodity crops aren’t always receptive to the needs of western growers. He reiterated that no matter the challenges, farmers themselves must advocate for the programs they need.  He reminded the audience of the importance of trade and marketing since half of what is grown in California leaves the state.

Water Policy

A panel discussion concluded the morning’s program with the speakers talking about the impacts of the drought and new water regulations on agriculture and indeed on California’s economy.  The impact of the Sustainable Groundwater Management Act or SGMA will be profound.   The Central Valley has until 2040 to find ways to bring into balance its pumping of groundwater versus its replenishment.  The current large amount of overdraft will have to be reduced, requiring a host of new technologies, improved practices and local cooperation.

The panel moderator was Sarge Green, interim director of the Center for Irrigation Technology at Fresno State.  Panel members were Gary Serrato, general manager of the Fresno Irrigation District; Dr. Ellen Hanak, director of the Water Policy Center for the Public  Policy Institute of California; and Curtis Tarver, assistant state conservationist for field operations of USDA’s Natural Resources Conservation Service – California.

To lead off, the group was welcomed by three administrators from the university:  Institute Director Dr. Susan Pheasant, Dean Dr. Sandra Witte and interim provost Dr. Bob Harper.  The ag school currently has nearly 400 students and a number of new faculty of have come on staff this year.  It was noted that Fresno County grows 400 different crops and commodities with 73 of them having at least one million dollars of annual sales.

WATER PANEL: From left are Dr. Ellen Hanak, Public Policy Institute of Calif.; Gary Serrato, Fresno Irrigation District; Sarge Green, Fresno State; and Curtis Tarver, USDA.

The conference concluded with a luncheon featuring keynote speaker Emily Rooney, president of the Agricultural Council of California.

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