A summary of CoBank’s article titled-
Forces That Will Shape the U.S. Rural Economy in 2019
Part 1 of a 2 part series.
By Sam Hartman
It seems like the world is getting more complicated by the day and it can be overwhelming and confusing to try to catch up with all the news outlets and current events. This brief, two-part series will break down the top factors that will affect the 2019 U.S. rural economy in summary paragraphs. This series will explore the global economy; the U.S. economy; monetary policy; the U.S. government; the U.S. farm economy; ag trade policy; grain, farm supply, and biofuels; and the U.S. animal protein sector. Each of these topics will help you better understand how such external factors might affect your farm business. If you’re interested and want to learn more about a specific factor, check out the full report published by CoBank’s Knowledge Exchange! The link can be found below.
- The global economy is slowing. The current U.S./China trade war is perhaps the largest contributing factor. Also to blame, the weakening of the European economy (Brexit uncertainty, stalled German economy, Italy’s rebellious budget proposal, and France’s progressive economic reform and resulting public unrest), and the continued rising level of global debt. While the current U.S. economy is strong according to most economic metrics, these global economic forces are stronger and the impacts will be apparent. If, however, the U.S. and China are able to come to an agreement (that is, if tariffs are not raised from 10% to 25%), the global economy could feel some relief.
- The U.S. economy is soon to break records and become the longest stretch of continued expansion in history. Some factors contributing to this include low unemployment, lower federal income taxes, consistent wage gains, falling crude oil prices, and increasing housing values. Unfortunately, in 2019 it is expected that these forces will weaken and some challenges will emerge, such as a slowing housing market, decreasing business investment, and shrinking labor availability. The largest factor, however, that will affect the U.S. economy in 2019 is the (hopeful) resolution of trade disputes between the U.S. and Mexico, Canada, Europe, and, especially, China. The continuation of international trade tensions will have a serious negative impact on the domestic economy.
- As for monetary policy, the fourth rate hike of 2018 triggered an unexpected scare in the stock market, leaving the year to end on grim outlooks. Major world economies were expected to experience shared growth in 2018, but that was not the case. Now, central banks across the globe are working toward stabilizing economies into recovery. Regarding the U.S. Federal Reserve, a closer watch on inflation will determine future rate hikes, but it is unlikely there will be many more as the U.S. inches closer to the risk of a recession. On a positive note for agriculture, leveling out monetary policy could halt the downward pressure on commodity prices.
Click here to view CoBank’s full report.
- As of early January 2019, and for the first time during the present administration, control of Congress split as the Democrats took control of the House and the Republicans took control of the Senate. Through bipartisan cooperation, however, the previous Congress reauthorized the Farm Bill in 2018. Highlights of the bill include strengthening the dairy safety net, reauthorizing and strengthening the Agricultural Risk Coverage and Price Loss Coverage crop insurance programs through 2023, increasing the cap for direct and guaranteed Farm Service Agency financing, and removing hemp from the controlled substance list. The present Congress will focus on commencing the bill’s changes. It is likely that this will begin with a hearing in the spring regarding rural economies and farm credit conditions. A key theme reemerges: success of many U.S. industries, especially agriculture, hinges on the reestablishment of major trade relationships, and for agriculture this would be the United States-Mexico-Canada Agreement (USMCA).