USDA chief economists look ahead
WASHINGTON, D.C. -- Robert Johansson isn't a seer, soothsayer or prophet; he doesn't know what the future holds. But the U.S. Department of Agriculture chief economist is confident in saying this:...
WASHINGTON, D.C. - Robert Johansson isn't a seer, soothsayer or prophet; he doesn't know what the future holds. But the U.S. Department of Agriculture chief economist is confident in saying this:
Agriculture "is cyclical. If you're in a down cycle (as is the case now), sooner or later, there will be an upswing. But when it will happen is hard to predict," he said.
Johansson spoke April 24 to members of North American Agricultural Journalists during the group's annual convention in Washington, D.C.
Johansson, a Minnesota native who earned his doctorate the University of Minnesota, has served in the U.S. Peace Corps, Congressional Budget Office, Office of Management and Budget and the USDA. He served as USDA deputy chief economist from 2012 to 2014, ascending to the top job in 2015.
Much of his presentation covered trends and developments with which many agriculturalists already have at least some familiarity.
The fundamental cause of generally poor ag commodity prices and low farm profitability is obvious, Johansson said.
"Global production has exceeded global demand for the past few years," he said.
Poor prices eventually will cut into planted acreages and production, at least for some crops, and boost prices. But when that will happen is uncertain, said Johansson, who added that strong competition for export sales, from South America and elsewhere, clouds the outlook
Some people, both in and out of agriculture, worry about ag producers' rising debt, leading to concerns that the U.S. ag economy might be headed for a repeat of the 1980s. Crushing debt then drove many farm families out of of business.
Today, ag producers' debt is rising to levels to similar to those in the 1980s, but today's interest rates are far lower, reducing the difficulty of making payments, Johansson said.
"The trend (of rising farm debt) is something we're watching, but the level right now is not something we're too concerned about," he said.
The news media has realized that times are getting tougher in ag and that many older farmers are getting out, he said.
"You'll see a lot of stories about transition, about farmers transitioning out of agriculture, passing it on to the next generation," Johansson said, cautioning against reading too much into what happens in any single year.
"It's hard to look at one year and say, 'Things are terrible, things are great,'" he said.
Other observations from Johansson included the following:
• The 2014 farm bill was written and approved when farm profitability generally was good. The next farm bill, on which Congress has begun work, will feature "stronger arguments" to increase farmers' economic safety net. The farm bill is the centerpiece of the federal food and agricultural policies; a new one is usually written every five years.
• Cash rents, for a number of reasons, haven't come down as much as might be expected, given weak farm profitability. The decline is likely to continue, which, if so, would help producers' bottom line, though it is difficult to predict how far and how fast rates drop.
• Young farmers, who entered agriculture when economic conditions were favorable, are "justified" in worrying about the next few years, given the poor prospects for substantially higher ag commodity prices anytime soon. On the other hand, interest rates, though rising, remain extremely low by historic standards, helping young producers finance their debt. Costs, particularly land rents, continue to decline, further benefitting young farmers and ranchers, he said.