The trade conflict is casting a shadow of uncertainty as farmers patiently await the weather to cooperate so they can begin planting.
There has been a lot of speculation about how the lack of trade agreements has impacted prices and future global partnerships, including in this space.
A recent farmdoc article authored by University of Illinois’ Krista Swanson, Jonathan Coppess and Gary Schnitkey and Ohio State University’s Carl Zulauf really hits home the trade conflict’s impact on Illinois agriculture last year and going forward.
It’s part of farmdoc’s Gardner Policy Series and includes documentation and graphs at farmdocdaily.illinois.edu.
Here is the summary and outlook from the foursome of the trade situation’s impact on Illinois agriculture: “It is estimated that Illinois agriculture experienced a total 5.5% loss in value from expectations for 2018, as represented by analysis on four major Illinois commodities.
“With the assistance of estimated Market Facilitation Program payments, total losses were offset, resulting in a net estimated gain in value of 1.4%.
“Although many economic factors influence price, prices were below expected values based on historical price and yield data. As an example, soybeans show clear negative divergence from a normal price pattern, even for a high yielding year, leading to the assumption that the difference is likely due to the trade conflict and retaliatory tariffs.
“Soybeans experienced a much larger deviation from expected price than other Illinois commodities and accounted for 73% of the total loss in value for Illinois agriculture.
“Despite the severe expected loss in value for soybeans, MFP payments more than offset those losses with soybeans receiving 95% of the potential MFP payments.
“Alternatively, MFP payments did not cover expected loss in value for corn. For Illinois grain farmers with a soybean and corn rotation, this could have been an advantage or detriment depending on the ratio of soybeans and corn on the farm in 2018.
“Illinois hogs also received a MFP payment that exceeded expected losses, while cattle did not receive any MFP payments despite a deficit between actual value of production and expected value in Illinois.
“The intent of MFP payments was to compensate farmers who suffered losses in 2018 related to the trade conflict. On the aggregate level, MFP payments sufficiently filled that intent for 2018, but will not cover future losses related to the currently unresolved trade conflict.
“As part of the temporary trade truce and ongoing negotiations, China resumed purchases of U.S. agricultural commodities in December 2018. While this was a positive for outlook, farmers entered 2019 with depressed prices, tariffs still in place and lack of resolution to the trade conflict.
“Assuming stable production and supply in 2019, higher prices will require restored export markets, an alternative demand replacement, or some other positive economic influence on demand.”