HAPPY NEW YEAR!... All of us at Pro Farmer wish you a safe a prosperous 2014. The markets and government offices are closed on New Year's Day, so there will be no Pro Farmer services. We'll be back with "First Thing Today" on Thursday, Jan. 2, to begin our 2014 coverage.
WHAT HAVE WE LEARNED FROM THIS YEAR?... Informa Economics Chairman and CEO Bruce Scherr along with Policy Analyst Roger Bernard took a look back and a look ahead in today's "Inside Washington Today" column. They say the biggest lesson learned in 2013 is that while U.S. consumers were still wary, they would open their wallets and spend. Improved consumer sentiment continues to loom large as the catalyst for the U.S. economy, making up some 70% of our economic activity. The U.S. Economy is poised to spurt ahead. Now we just need all the parts and pieces to stay on track long enough to make that a reality as opposed to just a prediction. The following are some of their other conclusions.
The Fed’s stimulus efforts at least helped the U.S. stock market, setting up most indices for their best showing since the mid-1990s. It took the wind out of the sails of gold futures, as markets realized the safe-haven metal was no longer going to be in vogue as economic performance started picking up steam.
It was also obvious that fiscal policy matters. But getting action on fiscal policy is another matter completely, especially with the divisive nature of the current U.S. Congress. Lawmakers should now know that a partial government shutdown is not the way to run an economy.
We learned the unemployment rate can come down even though job growth was not taking place at the level one would have expected with the upturn out of a major economic hole. Individuals leaving the job market altogether helped lower the jobless rate. Key looking forward is if economic performance in this country moves ahead at a pace to actually create more jobs than expected. If that happens, it could make for some interesting jobs data ahead.
2013 AG STORY OF THE YEAR: CROPS REBOUND FROM LATE START... The Pro Farmer 2013 ag story of the year was fairly obvious. While there were many other key stories that garnered consideration, top billing goes to the ability of the 2013 corn and soybean crops to rebound after record-late plantings. This year’s planting season stretched into June for most and July for some, and it left wide swaths of prevented-plant acres across usually highly fertile ground in northern Iowa and southern Minnesota. Still, this year’s growing season produced the largest corn crop and the third largest soybean crop on record. This year proved that big yields and crops can be grown in years with late plantings if weather is favorable the second half of the season and crops are given time to finish. Impacts from this year’s amazing crop recovery will be felt in the year(s) ahead.
The record corn crop this past growing season completely changed the fundamental makeup of the market. That shift in fundamentals will be felt for at least the remainder of the 2013-14 marketing year... and likely for more years to come. Instead of a supply crunch and historically high prices, corn prices are now on the decline as the demand base is rebuilt.
While the 2013 soybean crop didn’t have as dramatic or immediate of an impact on market fundamentals as the corn crop did, there is an influence. Even with the third largest soybean crop on record, carryover is projected to rise just marginally during 2013-14. Without the big soybean crop this year, the soybean market could have found itself without enough supplies to meet growing demand needs, which would have forced prices higher to slow use. Because of the big crop this year, the soybean demand base can continue to expand.
Honorable mentions for story of the year:
- Proposed RFS cut: On Nov. 15, the Environmental Protection Agency proposed cutting the Renewable Fuel Standard for 2014. The implied reduction to corn-based ethanol would be around 13 billion gallons, down from 14.4 billion gallons in the legislation and the mandate of 13.8 billion gallons this year. While this cuts the floor not the ceiling, fear of reduced corn-for-ethanol demand has kept corn futures under pressure.
- Government shutdown: The inability of Congress to reach a deal to keep the government open led to a 16-day shutdown. The shutdown caused USDA to cancel its October Crop Production and Supply & Demand Reports. Because USDA enumerators were unable to collect samples as harvest continued, some of their objective yield data was lost.
- Still no farm bill: The process continues... however, the moment of the year was the June defeat of the initial House farm bill — the first time ever a farm bill was rejected on the floor.
- MIR 162: China’s rejection of U.S. corn shipments since mid-November due to the presence of MIR 162 (Syngenta’s Agrisure Viptera) is a developing story. While this appears political, it’s a "wet blanket" on corn prices, making it hard for futures to put in a low.
- PEDV: The discovery of porcine epidemic diarrhea virus (PEDV) sparked fear of reduced hog numbers. The latest Hogs & Pigs Report reflected some of its impacts.
- Fed stimulus: Tapering was a buzz word in the investment world throughout 2013, with investors expecting action mid-year. The tapering will begin in January.
- ‘So God Made a Farmer:’ An uplifting moment of the year was the airing of Dodge’s commercial during the Super Bowl.
2013 AG PERSON OF THE YEAR: LARRY POPE... We know this won’t be a popular choice with everyone, but there’s no denying our 2013 ag person of the year was at the center of one of the top stories this past year. As CEO of Smithfield Foods, Larry Pope was instrumental in orchestrating the sale of the largest pork producer and processor in the U.S. to Chinese firm Shuanghui International, China’s largest meat processor. The purchase, which was first announced in late May, took until September to be completed as it faced regulatory hurdles and backlash from some in the industry. By completing this sale, Pope united two of the world’s largest meat firms, directly tying U.S. pork production to China.
While the sale of Smithfield to Shuanghui is controversial, it has potential impacts across the ag sector. This purchase is evidence China can’t feed its people on its own and is willing to "farm out" some of its pork production. And China is also farming out some corn and soybean production. Each pound of U.S. pork that is exported from the Southeast to China brings a bit of U.S. corn and soybean meal.
Honorable mentions for ag persons of the year:
- Congress didn’t get a new farm bill completed in 2013, but it wasn’t because of a lack of effort by some key behind-the-scenes individuals. University economists Gary Schnitkey (Illinois), Joe Outlaw (Texas A&M) and Carl Zulauf (Ohio St.) did research and multiple studies on the economic impacts that were used to help craft some of the proposals in the farm bill drafts.
- In Washington, Ag Committee staffers Joe Schultz in the Senate, along with Bart Fischer and Matt Schertz in the House also did countless hours of analysis on the farm bill. But perhaps their greatest effort was the back-and-forth work needed so that we will finally have new farm legislation in 2014.