Market Movers

November 11, 2015 02:39 AM
Market Movers

Follow these outside forces that could reshape the ag landscape

You don’t have to be the farm office version of CNN to monitor important global trends such as interest rates and demographic shifts. Instead, tune into a few key experts and resources that can provide you access to great information about which microeconomic and macroeconomic factors might affect your commodity marketing strategy in 2016. 

What Does It Mean To Me?
  • Regulatory and monetary policies are at odds in the U.S., limiting growth.
  • A strong dollar limits export competitiveness, but new markets will emerge.
  • Values for other commodities such as oil are worth monitoring. 

There’s no way to scientifically rank those factors by bottom-line impact, but you can evaluate the trends on this page against the commodities you sell and the markets you serve. Here’s a look at big-picture issues facing farmers in 2016, as shared by Michael Swanson, agricultural economist and senior vice president at Wells Fargo Bank; Stephanie Mercier, Farm Journal Foundation senior policy and advocacy adviser; and USDA. 

Domestic Economy
The U.S. faces a conflict between regulatory and monetary policies, Swanson says, and as a result, “we’re not seeing growth.” Poor growth overall reflects that most economic expansion of late has come from more capital and more productivity at U.S. businesses. 

He anticipates gross domestic product (GDP) will be as low in the second half of the decade as it has been in the first half. He also expects wages could experience inflation as the workforce tightens amid a 5.1% unemployment rate.

Global Trade
World population growth and increasing incomes are an undeniable trend, but that doesn’t mean it will be easy to make money in agriculture, Swanson cautions. Keep in mind just four countries—Japan, China, Mexico and Canada—account for 55% of all ag exports.

“Think about how quickly things change,” he says. China, for example, has come out with its weakest growth rate in years. 

Meanwhile, the strength of the dollar has made U.S. ag exports less attractive than cheaper-priced commodities from other countries. Yet opportunities still exist. For example, USDA notes Russia is expected to present opportunities for U.S. producers when it reopens its market to beef imports in 2016. 

Oil Prices
Through the new year, oil prices are expected to continue falling, “reflecting global crude oil production outstripping consumption,” USDA says. “Beyond 2016, nominal crude oil prices are assumed to increase as global economic activity improves.”

Oil is on Mercier’s list because of its close ties to the price of corn in the past decade.

“That’s in part why crop prices went so high in 2007-2008—because oil prices were so high,” Mercier says.

European Attitudes
Movement by European nations to restrict imports and cultivation of GMO crops concerns Mercier entering 2016.

“My view is that we’ve long ago given up access to Europe’s markets for bulk commodities,” Mercier says. “The greater concern is that the European attitude is starting to infect other countries.”  

In 2002, for example, Zambia balked at accepting GMO corn as residents starved. “The need for more food is so dire in Africa that we cannot afford to take anything off the table,” she says.



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