A stabilizing economy, the need for tweaks in the farm bill, and the importance of trade to the U.S. ag economy provided timely insights ahead of the next planting season for the more than 120 participants at the Rural Economic Outlook Conference, held Oct. 20, at Stillwater, Okla.
Keynote speakers at the conference, held each year on the Oklahoma State University campus, included Cortney Cowley, an economist in the Regional Affairs Department of the Federal Reserve Bank of Kansas City; Dr. Pat Westhoff, director of the Food and Agricultural Policy Research Institute, University of Missouri; and Dr. Luis Ribera, professor and director of the Center for North American Studies at Texas A&M University.
Cowley addressed the crowd about the economic conditions in the United States and Oklahoma.
“A lot of what we are seeing both in the U.S. and Oklahoma, more regionally, is moderate growth,” said Cowley. “Digging down more into some of the economic indicators, if we look at measures of gross domestic product (GDP), unemployment, employment growth and personal income, we’ve seen some weakness in 2015 and 2016 in Oklahoma but a lot of that has stabilized coming into 2017.
“So, how commodity markets go is how Oklahoma goes,” she said. “Weakness in oil and natural gas and agricultural commodities contributed to a lot of the weakness in 2015 and 2016. But some of those have rebounded coming into 2017—cattle, oil and natural gas. We are still seeing a lot of weakness in the crop sector, but other areas of improvement have contributed to stabilizing the Oklahoma economy.”
See stronger than expected prices round out year, http://bit.ly/2Al2WOc
While farm income is expected to remain low in both the nation and the District, like Oklahoma, Cowley noted recent signs of stabilization. She expressed concern about the agricultural credit conditions, which have continued to weaken, but noted that deterioration has slowed.
Westhoff focused on the farm bill, the context of the next farm debate and outlining some of the major issues in agriculture today. He also discussed how the current [commodity] programs might play out if they continue in the future and some of the changes people want to see in the next farm bill.
“People definitely want to see some changes in the dairy program and definitely want to see some changes in the cotton program,” Westhoff said. “Those are both cases where people feel the current provisions are not providing enough support to those commodities.
“Another set of folks want to see much, much bigger changes in the overall type of support that we provide agriculture, maybe by making major cuts to chief budgetary objectives or restructuring programs to achieve something different than we are achieving today.”
Westhoff said because cotton, a major commodity, was not included in the Agriculture Act of 2014 Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, there is talk about providing support to the cotton industry by creating a cottonseed program.
“They’ll make a payment if cottonseed prices fall below a trigger level,” Westhoff explained. “So, that’s one that’s been seriously discussed.
“It is far too early to know with confidence when the next farm bill will be passed and what it will say and if the President will sign it. To become law, the farm bill will need 218 votes in the House and 51 or (more likely) 60. That means a bill almost certainly will require bipartisan support to clear both chambers. If the President vetoes the bill, it requires a two-to-three vote in both the House and the Senate to override,” said Westhoff.
With about one-third of U.S. farm income generated from this nation’s export market, Ribera spoke about the importance of trade with other countries, including the North American Free Trade Agreement, NAFTA and its success in fulfilling its objectives.
“We depend on agricultural markets,” he said. “We need to maintain the markets that we have — and possibly expand them.” The U.S. is the largest agricultural exporter in the world, shipping $135 billion in commodities in 2016.
Trade and NAFTA
The U.S. has about 25 percent of the world’s gross domestic product (GDP), making trade with America of great interest to other countries, Ribera noted. “We have 350 million people [in the U.S.] with money, who control about 25 percent of the world economy, so there’s no question about why other countries want to get their products into the U.S. market.”
Ribera discussed NAFTA, a 1994 trade pact between the U.S., Canada, and Mexico, and its success in increasing U.S. exports to NAFTA countries. “We have quadrupled our exports to NAFTA countries, while only tripling exports to the rest of the world,” Ribera said. “NAFTA is very important for U.S. agriculture. A lot of things about it can be improved, but there’s no question it has been successful in terms of agricultural trade.”
U.S. agricultural exports have increased from $46.2 billion in 1994 to $134.9 billion in 2016, a 192 percent increase, he said. During the same period, U.S. agricultural exports to Canada and Mexico grew from $10 billion to $38 billion, a 288 percent increase, making those nations the second and third largest markets for U.S. exports.
With all the discussion by the Trump administration about renegotiating NAFTA, Ribera said, it is important to point out that, if agriculture were the main issue, he thinks it would be easier to get an agreement done. But agriculture constitutes only about 7 percent of trade between the three countries.
“So basically, non-agriculture issues have dominated the NAFTA discussion,” he said.
See conference photo gallery. http://bit.ly/2m1Qvoe
The conference concluded with a Rapid Fire Outlook Panel featuring speakers: Damona Doye, Rainbolt chair of Agricultural Finance; Rodney Jones, Farm Credit chair; Kim Anderson, OSU Agricultural Economics professor emeritus; and Derrell Peel, OSU Agricultural Economics Charles Breedlove professor.