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Interesting info gained at annual ag. meeting

Monday, November 16, 2015

 

 

By Rep. Paul Anderson

 

The annual AgriGrowth meeting and conference was held at the Minneapolis Convention Center last week, and it’s one of the annual events I put on my don’t-miss calendar.

 

Top-notch speakers and the latest in agricultural news are the usual fare, and this year’s event featured more of the same. Michael Swanson, agricultural economist and senior vice president of Wells Fargo, led off the day’s schedule with his outlook on the economy. He said three major trends will affect the ag economy in the coming months, with the biggest impact possibly coming from a stronger dollar and higher interest rates.

 

The emergence of China with its level of imports is also huge, along with our nation’s bio fuels policy. Swanson predicted an increase in long term interest rates, something that could begin in December when the Fed meets for its monthly meeting. After years of low rates and a weak dollar, we should anticipate the dollar going up in value relative to other nations’ currencies.

 

That trend has already started, and it will continue, according to Dr. Swanson. It will have a large impact on our ability to compete in the world export market, as American products become more expensive in comparison to those same products from other countries. He mentioned soybeans and dairy, as two agricultural commodities that rely heavily on the export market to absorb our excess production. Currently, four countries, Japan, Canada, Mexico, and China, account for over half of our agricultural exports.

 

Swanson also discussed the cost squeeze facing American farmers. Net income has come down rapidly in the past two years, while the cost of inputs has remained stubbornly high. Ten years ago, for example, American farmers spent $217 billion to raise crops and livestock and were left with $57 billion in net farm income. This year, they are expected to spend a whopping total of $377 billion on inputs and will be left with about the same income level as ten years ago, $58 billion.

 

Also on the program was Peter Zeihan, founder of Zeihan on Geopolitics, who gave a fascinating speech on America’s role in the world since WWII and how we will maintain that position. With our Navy, he said, we guaranteed the safety of world trade as we assembled a block of nations to fight the cold war. With 10 super aircraft carries at our disposal, we will continue in that role.

 

With our country’s access to two oceans and the largest inland river transportation system in the world, we have been blessed with low cost infrastructure to move our goods and also the isolation from most of the rest of the world. He showed a slide naming the wars in Europe over time that have caused a disruption in their supply of food, and those wars filled the entire page. Contrast that to America, he said, and the only two conflicts that caused such disruptions here were the Revolutionary War and the Civil War.

 

He predicted that America is two years away from energy independence, saying that natural gas is our most widely used energy product, and we have the lowest price for it. As baby boomers retire, they are driving less, and he also said that the advent of hybrid cars has lowered our energy demand by one percent.

 

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We have experienced some beautiful fall weather of late. I even saw a group of motorcycles on the road this past Sunday, Nov. 15. The dry fall led to a quick harvest, and crops throughout our area and the entire state were, for the most part, excellent. Prices for most crops and livestock have been falling, however, and it’s difficult to come up with positive cash flows. It would appear that, barring a major weather situation somewhere in the world, we are in for several years of tight or non-existent margins.

 

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