Economic outlook improves for dairy, livestock producers

Farm Credit board receives quarterly economic report

The Farm Credit Administration board received a quarterly report on economic issues affecting agriculture, together with an update on the financial condition and performance of the Farm Credit System as of March 31, 2019.

Several factors continue to influence the farm economy. According to earlier projections, crop prices were expected to be low this year because of large supplies and trade disruptions, particularly for soybeans. However, wet weather in the Midwest has delayed or prevented plantings and introduced substantial production risk, causing a major price rally for corn and soybeans. This has created pricing opportunities for producers who are able to raise crops this year.

Crop insurance indemnities and payments from recently enacted disaster legislation will cover some losses. USDA payments designed to offset trade impacts will also provide some relief. Production and price risk will likely remain elevated as the growing season unfolds.

The outlook for livestock and dairy producers has improved because of slowing production growth and relatively strong domestic and export demand. Returns for U.S. hog producers have also turned positive because the emergence of African swine fever in China has reduced global supplies of pork. However, margins for livestock producers will likely narrow because recent increases in crop prices are expected to boost feed costs.

For the first quarter of 2019, the Farm Credit System reported strong earnings and higher capital levels. Loan quality in the system’s portfolio remained at acceptable levels, but credit risk measures were higher for the quarter, underscoring the significant operating challenges facing producers in many ag sectors.

Featured Posts