The global recession will continue to keep pressure on U.S. grain, hog and dairy markets in 2024. Plus, the U.S. is being undercut in the world export markets, with the strong dollar and the rising dominance of the southern hemisphere.
David Kohl, Professor Emeritus of ag and applied economics at Virginia Tech, recently shared this message at the Waterstreet Solutions Edge Conference in Tucson, Arizona.
He noted China’s economic growth rate was only between 2% to 4% in 2023. As a result, U.S. exports to China were down 40% - with that trend expected to continue through 2030.
“One in five dollars of net farm income comes from export markets and as we look at this global economy, we’re in a global economic slowdown,” Kohl says. “No. 1 is China because of its demographic issues and also because of the exports being down to China not only around the world but to the United States and Europe, along with the European economy kind of being in recessional times.”
Kohl says at the same time, South America’s agricultural production is expanding. Each year, land equal to half the size of Illinois goes into production in Brazil, turning the U.S. into a secondary provider.
“In other words, Asia and China, they’re going to go to the southern hemisphere. Whether it’s Brazil or New Zealand, Australia, etc. - they’ll go there first,” he says. “Now if they can’t supply them, then they’ll come to the United States and that’s going to pick up more and more steam as we move toward 2030 and agriculture producers and the ag industry are going to have to integrate that into strategy.”
Those export customers are also going away from the U.S. dollar and creating their own currency. As a result, Kohl says farmers will see tighter margins and need to globalize and future-proof their operations.
“You keep your business very financially liquid with working capital. Keep your cash and keep your options open,” he says. He adds to focus on the things you can control and manage around the uncontrollables.
