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Speaker: Federal payments, pandemic shaping ag

Federal payments, as well as low interest rates, have helped to prop up U.S. agriculture. Meanwhile, the coronavirus pandemic continues to roil the U.S. economy and U.S. ag sector, an ag official says.

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Tanner Ehmke, manager of CoBank's knowledge exchange division, which provides market and industry research on sectors affecting the rural economy. (CoBank)
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Overall U.S. farm profitability has improved recently. Credit unusually big federal payments, an ag official says.

"This is a story really carried by the U.S. government payments to farmers and ranchers (that) have reached new highs," said Tanner Ehmke, manager of CoBank's knowledge exchange division, which provides market and industry research on sectors affecting the rural economy.

Ehmke spoke Nov. 5 during the Virtual 2020 Minnesota Ag and Food Summit. The online preservation was available to the news media.

The event was hosted by the Minnesota AgriGrowth Council, a nonprofit, nonpartisan member organization representing the agriculture and food industry.

The U.S. ag sector in general had struggled in recent years. But now, "net-farm income has been steadily coming back from bottoming in 2016," Ehmke said.

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"Is that because farmers have more money in their bank account from the marketplace? Not so much. In fact, right now it's estimated that net-farm income is over one-third from government payments. That's very nice of them to do that. Thank you, Uncle Trump," Ehmke said. "But, however, is this something we can count on going forward?"

As he noted, the federal payments came in several forms, some a response to the global trade war and the resultant drop in world food prices and some a response the the pandemic.

The combination led to the federal government stepping in "in a very, very unusual way in the last couple of years. Can we expect this type of behavior going forward? Not likely."

Though there might be another aid package to farmers and ranchers in 2021, "We're already hearing concerns from legislators on (Capitol Hill.)" So it would be "reasonable to assume" that at least some forms of recent government aid will decline or even disappear entirely, Ehmke said.

Extremely low interest rates, which hold down borrowing costs, help to bolster farmers' finance, too, he said.

Also on the bright side, grain and oilseed prices have increased recently.

The rally in soybean and corn prices was sparked by increased Chinese busying and the relatively weak U.S. dollar, which makes U.S. ag products more affordable to foreign customers. And rising wheat prices reflect dryness in several key growing areas worldwide, Ehmke said.

China has bought a lot more U.S. meat, too, he said.

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Pandemic's impact

In any case, the coronavirus pandemic continues to exert a huge effect on the U.S. economy and U.S. ag, Ehmke said.

"COVID is the economy. How COVID goes, so goes the economy," he said.

The best analysis now is that U.S. death toll from COVID-19 will continue to rise. "This has a huge, huge economic toll," he said.

When Ehmke spoke at the AgriGrowth event, votes in the presidential and some state elections were still being counted. At the time, it appeared likely that Joe Biden would be elected and that Republicans would maintain control of the U.S. Senate, though Ehmke emphasized that won't be certain until all the votes are counted.

With the pandemic expected to worsen this fall, "the U.S. economy will really be sucking wind" when Joe Biden assumes the presidency in late January if his lead holds, he said.

And if Biden is elected and Republicans hold on to the Senate?

"People in the business community are saying, this is the best of both worlds perhaps. If we lose some of the volatility and uncertainty on trade, and then (Republican Senate leadership preventing tax increases), it could be a win-win for the economy," Ehmke said.

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