Low commodity prices are depressing farm income, farmland values and repayment rates on farm loans, says the Kansas City Federal Reserve Bank, while larger-than-expected farm exports “seemed only to keep prices for some commodities from dropping further.” Weighed against burgeoning U.S. stockpiles and forecasts of large 2017 crops, “agricultural producers in the United States likely will become increasingly reliant on international demand and exports to support domestic prices and farm incomes.”
The Kansas City Fed report put a spotlight on the U.S. position as the world’s largest agricultural exporter. Nearly half of the 2016 soybean crop, 42 percent of the wheat, 74 percent of cotton, 15 percent of corn and 15 percent of beef, pork and poultry meat will go to foreign markets, according to USDA. Exports generate 20 cents of each $1 in farm receipts.
“Farmers in the United States and Brazil produce twice as many soybeans as their respective countries can consume,” wrote Kansas City Fed economist Cortney Cowley and assistant economist Matt Clark. “As production continues to increase, U.S. farmers likely will become increasingly dependent on exports to countries like China that consume 10 times the amount of soybeans they produce.” The cautionary note, said the economists, is that soybean prices “could become less optimistic” if there is a good crop in South America. U.S. corn and wheat prices tend to fall as stockpiles grow, as they are doing now, making exports a relief valve.