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READ the NAFB’s National Ag News for Wednesday, June 26th
Ag Lenders Are Feeling Squeezed by the Struggling Economy
President Donald Trump’s trade war seems to be pushing the rural economy closer and closer to a meltdown. Politico says economic challenges in agriculture are weighing heavier on banks that lend to farmers and ranchers. Farmers are getting slammed on all sides by retaliatory tariffs, unusually bad weather, as well as a five-year drop in farm incomes. Even the African Swine Fever outbreak in China will affect U.S. farmers because it will put a big dent in the demand for American soybeans, even if the trade war with Beijing is finally resolved. Iowa corn and soybean farmer Grant Kimberly tells Politico that agriculture has seen more than its share of “black swans” in the past couple of years. “We’ve had bad weather, we’ve had African Swine Fever, and we’ve had trade wars,” he says. “I’d say this is pretty unprecedented territory. We haven’t seen anything like this since the 1980s.” During the first quarter of 2019, the farm loan default rate hit the highest level it’s been at in seven years. One in five farm borrowers increased the amount of debt they carried over from 2018 to the first quarter of this year. Producers are estimated to hold approximately $427 billion in debt this year, the most since the 1980s farm crisis.
Justice Department Intervenes in Poultry Price-Fixing Court Case
The U.S. Department of Justice intervened last week in a price-fixing lawsuit against some of the nation’s biggest poultry companies. The Fern Dot Org website says that could signal that the department’s own grand jury investigation into the chicken sector might result in criminal indictments. The Justice Department asked the U.S. District Court in northern Illinois to stop discovery in a class-action lawsuit brought by food distributor Maplevale Farm, saying in a motion that a “limited stay is needed to protect the grand jury’s investigation.” The stay applies to all “defendant employee and former employee depositions” and was granted on a temporary basis. There will be a hearing later this week on the DOJ request for a six-month stay. A professor at the University of Wisconsin-Madison law school calls the development “significant.” The investigation signals that the DOJ feels “there are serious violations here that require the grand jury inquiry and the potential for criminal indictments.” The lawsuit alleges that the companies colluded on price hikes by relying on Agri Stats, a secretive information sharing service used by poultry companies. The suit also says those companies manipulated prices up to artificially high levels.
Farmers’ Working Capital “Critically Low”
The agriculture sector is suffering from working capital that’s fallen to critically low levels. That news is from the forecasting firm Agricultural Economic Insights. The firm recently analyzed data put out by the Economic Research Service, saying the declines in working capital are stark. Brent Gloy, a Nebraska farmer and economist, writes that “Working capital is projected to fall by 25 percent from last year to this year. This is right on the heels of a 30 percent decline from 2017 through 2018.” Gloy says the current level of working capital amounts to just 31 percent of what was available back in 2014. It’s only 23 percent of the working capital that was available in 2012. He says, “The Market Facilitation Payments are large enough to actively move the needle on financial conditions in the Ag sector. However, they will clearly not rebuild working capital to levels that are necessary to give long-term financial stability to the American agricultural sector.” Gloy also says the declines in the farm sector’s working capital are substantial and should cause some serious concerns about the financial health of the farm sector.
Pelosi: Deportation Delay Won’t Lead to Immigration Deal
Agriculture may be waiting a while for the nation to improve the immigration program it relies on to provide farm laborers. President Donald Trump agreed to a two-week postponement of mass deportation of illegal immigrants while asking Congress to work out an agreement on changes to the nation’s asylum laws. House Speaker Nancy Pelosi had asked the president to delay the deportations. However, she says Congress will not be working out a deal with Republicans to reform asylum laws. Instead, Pelosi tells the Washington Examiner that the two-week delay will simply give activists and the religious community more time to speak out against the deportations. Trump pulled back on plans last week to round up thousands of illegal immigrants, with an emphasis on deporting those who posed security and safety risks. Trump, along with many Republicans, want to change the asylum laws, which they think makes it too easy to get into the United States. Many of the 100,000 illegal immigrants apprehended at the southern border each of the past three months claimed asylum. Pelosi says there will be no negotiating on the asylum laws. She says Democrats instead want a complete overhaul of the immigration system, as well as a pathway to citizenship for the illegal immigrants already in the country.
Pork Exports to Taiwan Jumping in 2019
While Taiwan is still a relatively small market for U.S. pork to date, exports are surging so far in 2019. Through April, U.S. pork shipments to Taiwan totaled 8,819 metric tons, an incredible 80 percent higher than last year. Drovers’ Ag Web Dot Com says those pork exports also took a significant jump in cash value, coming in 55 percent higher than last year at $19.3 million. Taiwan is also a tremendous place to send U.S. beef exports. Exports topped $500 million dollars for the first time in 2018. Last year’s exports totaled 60,000 metric tons and came in at $550 million, nearly doubling in volume and more than doubling in value over a period of just five years. Joel Haggard is the U.S. Meat Export Federation’s senior vice president for the Asian Pacific. He feels Taiwan is an excellent opportunity for future growth in U.S. exports. Beef’s presence continues to expand in Taiwan’s restaurants and retail stores. Taiwan is also a new market for U.S. lamb exports. Lamb producers regained access to the Taiwanese market back in 2016.
USDA Still Has Over $2 Billion to Invest in Rural America
The U.S. Department of Agriculture has more than $2 billion available this year to invest in community facilities and infrastructure projects in rural areas. “Modern and accessible education, health care, public safety, and municipal services are the foundation for a high quality of life,” says Acting Assistant to the Secretary for Rural Development Joel Baxley. “The USDA is committed to be a strong partner for rural communities to build the facilities they need for their essential services, as well as improve the infrastructure those services rely on to operate in rural America.” USDA is already making those kinds of investments in rural communities across the country and has additional funding available through the Community Facilities Direct Loan Program. More than 100 types of projects are eligible for funding under the USDA’s Community Facilities Program. Eligible applicants include municipalities, public bodies, nonprofit organizations, and federally-recognized Native American tribes. Congress appropriated $2.8 billion for the Community Facilities direct loans and grants in the fiscal year 2019.