“It was the best of times, it was the worst of times,” are opening words to Charles Dickens novel, “A Tale of Two Cities,” written 1859. I cannot think of a more appropriate description facing American grain and livestock than those words penned 160 years ago.

In fact, since the farm crisis of the 1980s no other period in U.S. agricultural has been as difficult as the one now being experienced.

Wikipedia describes the farm crisis of the 1980s as such: “The United States experienced a major agricultural crisis during the 1980s. Record production during this time led to a fall in the price of commodities. Exports fell, due in part to the 1980 U.S. grain embargo against the Soviet Union.

“Farm debt for land and equipment purchases soared during the 1970s and early 1980s, doubling between 1978 and 1984. Other negative economic factors included high interest rates, high oil prices and a strong dollar.

“By the mid-1980s, the crisis had reached its peak. Land prices had fallen dramatically, leading to record foreclosures. The Farm Credit System experienced large losses, which were the first losses since the Great Depression.”

In February 2018, the U.S. Department of Agriculture noted that net farm income from all sources for U.S. agriculture producers fell to a 12-year low.

In March of this year, they stated, “inflation-adjusted net farm income in 2019 would be 49.0 percent below its highest level of 2013 and below its historical average across 2000-2017.” Needless to say, from an income level farmers and ranchers are experiencing the worst of times in nearly 40 years.

I cannot think of any profession or occupation — doctors, lawyers, teachers, truck drivers, construction workers or hamburger flippers — whose income last year and this is at a 12- to 19-year low.

But American farmers and ranchers – the very people that feed and clothe our nation – are enduring such a situation, and have been for years. And the last time such a set of circumstance befell American agricultural was during farm crisis of the 1980s.

The primary reason agriculture producers are struggling is because there are no shortages with any commodity. History shows without a shortage, or perceived shortage, it is difficult for prices of any commodity to improve in value and hold the gains for a sustainable period of time.

There are no shortages because American agricultural producers are the most successful businessmen and women in history. Year in and year out, they produce regardless of political issues, currency fluctuations, interest rates, or the whims and ways of Mother Nature.

Yes, in one sense, farmers and ranchers are struggling financially because they are too successful. And if history repeats itself, they will continue to be successful and feed and clothe the nation in the future. However, on the horizon, there is a sea change coming for American agriculture.

A few weeks ago in this column, I posted a piece entitled “Game changer.” I stated: “If and when China and the United States strike a deal to end the trade war, it is a game changer for American agricultural. A deal should be agreed up within a month.

“I am basing that forecast on how much volatility is taking place with most all ag-markets and how anticipatory the futures market has been down through history. Without embellishment, a trade deal with China is a game changer for U.S. agriculture.”

Unfortunately, as of this week, no deal with China has been struck. It is highly likely that a deal will be done, but each week there is stalling, balking, stonewalling and delays in getting the job done.

Such indecision has caused the U.S. ag markets to experience uncertainty. And when it comes to markets of all kinds, uncertainty is bearish.

Once a deal is struck and China honors its pledge to buy $50 billion worth of ag products from the United States, it will be unparalleled in history.

The amount of money China plans to spend is simply breathtaking, and such purchases will alter the balance sheet for host of commodities. It is impossible to say what exactly is on the Chinese shopping list, but rest assured, high-protein products will be sought eagerly.

Bank on it.

Learn the history of markets and what happens when supplies of grains or livestock tighten due to increased demand. Check out commodityinsite.com and look for only book that I know about the history of ag futures. That book is entitled “Haunted By Markets.”

Learn about history. Don’t be left behind.

And understand: A trade deal with China ends what see now, “the worst of times,” and ushers forth what history will eventually describe as be the “best of times” for American agriculture producers, farmers and ranchers.


Load comments