Written by Krista Swanson.
From the general economy to geopolitical relations to climate concerns and weather events that influence production. There is no shortage of uncertainty that impacts agriculture. Uncertainty often correlates with volatility in the marketplace for both farm inputs and the commodities farmers produce. The cycle persists; as time passes some unknowns are realized while new unknowns emerge. Final 2022 production, weather impacts on meeting demand, and midterm elections are three of the current uncertainties in agriculture with recent projections that sharpen the outlook.
As harvest nears completion in Missouri and across the nation, 2022 yield projections near final values bringing clarity to one unknown factor in the agriculture marketplace. The United States Department of Agriculture’s latest report included raised 2022 crop yields and production values from recent months projections. Despite the slight increases, 2022 yields across Midwest crops are expected to be near or below a longer-term trendline, keeping supply relatively tight for the time.
While domestic use of several major agriculture commodities is expected to increase, exports are an important component of demand. Aside from exports to other North American destinations, a large portion of Midwest agriculture commodities destined for export will travel by river to the Gulf of Mexico.
The U.S. Drought Monitor, released by the University of Nebraska Lincoln, indicates more than 85% of the US mainland is at least abnormally dry with 60% in drought. Widespread moisture deficiency is not only concerning in terms of growing crops and adequate feed and forage for livestock, but it is also putting waterway transport at risk and many major river systems are running at all-time low levels. Barge traffic has stalled on parts of the Mississippi River, an important outlet for Missouri farmers, resulting in skyrocketing shipping costs.
A major export window for U.S. crops extends from harvest through late winter, when harvest in the southern hemisphere begins and a new influx of supply hits the world market. The U.S. is challenged with disrupted pathways to export and high costs of transport in the midst of the peak export period. A transition in climate pattern could alleviate this challenge. The latest weather models from the National Weather Service Climate Prediction Center (Nov 10, 2022) indicate a 76% chance of continued warm, dry weather across much of the U.S. through February, with a 57% chance of transition to a more neutral pattern in February to April 2023. A transition will be a welcome change, and when it comes to river transport capacity – the sooner, the better.
The timing of a weather transition is beyond human control, but initiatives to control climate changes have been a top priority woven into various pieces of legislation by elected officials in Washington D.C in recent years. Although the midterm election day is in the rearview, vote tabulation for several tight races across the nation remain in progress. It appears Republicans will have a narrow majority in the House while the Democrats will retain majority of the Senate. The make-up of Congress is important because the policies passed impact farmers. Trade, taxation, immigration, and labor are among some of the largest policy areas that influence agriculture aside from the major piece of agriculture legislation commonly known as the “farm bill.”
This omnibus, multiyear law is normally renewed about every five years, dating back to the first farm bill in the 1930s. The bill addresses both agricultural and food issues, from commodity programs and crop insurance to nutrition programs. The current farm bill, officially the Agriculture Improvement Act of 2018, is set to expire in September 2023. Without reauthorization or extension, the programs would revert to the 1949 farm bill. Programs have evolved and improved greatly from that era. A reversion would leave out many commodities now covered and remaining commodities subject to dated and potentially costly programs. Historically, most farm bills have passed with constructive bipartisan effort. The expected balance of power and narrow majorities in both chambers indicate bipartisan efforts and cross chamber cooperation will be critical to ensuring farm safety net programs remain available for farmers.
Whether in Congress or on the farm, without cooperation there is no progress.
https://www.fb.org/market-intel/what-is-the-food-and-farm-bill-and-why-does-it-matter
https://droughtmonitor.unl.edu/CurrentMap/StateDroughtMonitor.aspx?conus
CRS: What is the Farm Bill?
Krista Swanson is a consultant and speaker for her business AgSCOPE, and a research analyst for the Department of Agriculture & Consumer Economics at the University of Illinois where her work is frequently published in articles on farmdoc. Krista and her husband actively farm with his family where they raise corn, soybeans, and four kids on the farm.
Disclaimer: The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views, opinions or positions of FCS Financial.
