Guebert: Too many unknowns to predict 2020 in ag industry
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Guebert: Too many unknowns to predict 2020 in ag industry

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The best way to begin a new year without feeling overwhelmed by what we don’t know is to start with what we do know.

For example, we know the U.S. Department of Agriculture’s December World Agriculture Supply and Demand Estimate shows that about 14 percent, or 1 in 7 bushels, of the 2019 U.S. corn and soybean crops will be “carried over”—remain unsold — when the 2020 harvest begins next fall.

While neither amount is historically large, each is large enough — barring some unpredictable man-made or natural event — to keep the lid on both markets through then, guesses USDA. It estimates the average 2019/20 season price for corn at a rock bottom $3.85 per bushel and, likewise, pegs soybeans’ season average price at an equally low $8.85 per bushel.

Alan Guebert

Guebert

We also know that last year’s awful spring planting weather dropped soybean plantings from 91 million acres in 2018 to 76.5 million acres in 2019. Given low U.S. prices and forecasted record Brazilian soy production, will U.S. farmers hold 2020 soybean acreage to less than 91 million or will they plant back to 2018’s level?

No one knows.

We do know, however, that today’s revenue (we misname it crop) insurance program will be the key deciding factor. In fact, the big looming market question now is “Which crop, corn or soybeans, will deliver the best revenue insurance payout in 2020 given the bleak price outlook?”

And, ironically, we also know that some major unknowns could make 2020 a better year than it currently appears. Either of two prominent unknowns—another round of unforeseen government payments like 2019’s trade mitigation payments or a return to trade normalcy — could do the trick.

Together, though, the combined impact would be a huge game changer. In 2019, for example, the massive trade mitigation payments alone added 24 percent, or $22.5 billion, figures USDA, to the year’s forecasted net farm income of $92.4 billion.

Secretary of Agriculture Sonny Perdue has already noted, however, that he “hopes” no trade payments will be needed in 2020. For that to happen, though, he knows China needs to buy pre-Trump levels of U.S. ag exports and the new U.S.-Mexico-Canada trade agreement, USMCA, needs to deliver more U.S. ag sales than most trade analysts predict.

Right now, both hopes look forlorn.

First, while China and the U.S. have a “Phase One” deal in principle, neither has yet to reveal, let alone sign, a detailed written deal to end their bitter, 18-month-old tariff war. That troubling fact only adds to current speculation that the amount of purchases the White House claims China will make in each of the next two years — $50 billion, or nearly two times China’s previous record buy — are, indeed, unbelievable.

Second, almost every analysis of USMCA shows that any gain in U.S. ag exports to both Canada and Mexico will be so modest that it likely will be unnoticeable. A 2019 International Trade Commission report claims USMCA, when fully implemented a decade from now, will deliver $435 million, or just 1 percent, more in U.S. ag exports than NAFTA.

Worse, that tiny increase shrinks even more when you subtract the expected boost of $80 million in U.S. ag imports under USMCA. After that, the net increase, $335 million, becomes less than rounding error.

The ITC also forecasts USMCA will generate only 1,700 “new jobs in (U.S.) agriculture.” Interestingly, that’s almost the exact number of Wisconsin dairy farms, 1,654, that went out of business in the last three years, according to that state’s ag department.

And that’s the good USMCA news. Here’s the bad: In November, USDA predicted Canada’s 2020 per capita Gross Domestic Product will increase a paltry 0.4 percent while Mexico’s GDP likely will be flat after shrinking 0.8 percent in 2019.

The USMCA upshot is that neither neighbor will be a bigger buyer next year or in the next decade.

Oh, and we know one more thing: 2020 is a presidential election year. That means, given today’s erratic, parochial politics, everything we know today could be absolutely meaningless by tomorrow morning.

And that means that 2019’s challenges were just a warm-up act for what appears to be an even more challenging 2020.

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Looking forward in 2020

From sports to entertainment to government and more, here's what you can expect so far in the new decade.

The Farm and Food File is published weekly through the U.S. and Canada. Source material, past columns and contact information are posted at farmandfoodfile.com.

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Related to this story

On Dec. 9, Politico published a 5,500-word story on how masters of the Big Ag universe met in a “closed-door meeting” last June in a “wood-beamed barn in Newburg, MD” to discuss an “issue so politically toxic” that the “guest list was confidential” and “no press was allowed.”

On Dec. 9, Politico published a 5,500-word story on how masters of the Big Ag universe met in a “closed-door meeting” last June in a “wood-beamed barn in Newburg, MD” to discuss an “issue so politically toxic” that the “guest list was confidential” and “no press was allowed.”

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