By Steven Bradley
Uncertainty over weather, trade policy and prices are making earning a living an increasingly tough row to hoe for South Carolina’s farmers.
“It’s a very challenging time to pencil out a profit,” said fifth-generation farmer John Michael Parimuha, who grows cotton and peanuts near Manning. “Equipment’s expensive, everything’s expensive — and we’re basically producing a crop for about the same thing we were 10 years ago. Everything is going higher, but our (profit margin) is not as much.”
But while the concerns are real, Clemson University Extension’s agribusiness experts say so, too, are the possibilities for growth and both domestic and global market expansion.
“Difficult times can bring opportunities, as well, and it’s on those opportunities we’ll continue to build a strong ag industry,” said Clemson University Sandhill Research and Education Center Director Kathy Coleman in welcoming an audience of producers, lenders and other agricultural stakeholders to the fourth annual South Carolina Ag Outlook Conference on Nov. 15.
At the event, the Clemson Extension Agribusiness Team provided an outlook for 2020, focused on identifying opportunities and threats for the financial success of South Carolina producers, with presentations on corn, cotton, peanuts, soybeans, wheat, livestock, poultry, industrial hemp and special topics on trade, small-scale animal processing, farm stress and ag labor.
Parimuha said while the overall message supported his own notion that producers are finding profitability difficult, the information provided by Clemson’s agribusiness team would be invaluable in helping him rise to meet the challenge.
“This is just a good event to come to for a little insight on what could happen with our markets for next year,” he said. “I go to a lot of Clemson Extension events and every single one of them has improved my bottom line somehow.”
Clemson Associate Professor of Agribusiness Adam Kantrovich kicked off the conference with a trade update, emphasizing to the audience that the current situation in U.S. agriculture met all the conditions necessary to be considered a “trade war.”
“Have we taken shots somewhere else? Yes. Has there been retaliation? Yes. Well, we’re in a trade war,” he said.
China is the most notable adversary in this particular trade war, according to Kantrovich, with its importance to American agriculture lying not only in its population — 1.4 billion people as of 2017 — but also an exploding middle class, which is estimated at 430 million and expected to be 780 million by the mid-2020s, making it a massive potential market for American producers. By comparison, the entire U.S. population is about 330 million, with roughly half being classified as middle class.
“China’s middle-class wealth is continuing to grow, and they have an appetite for Western products, including our protein,” Kantrovich said.
Where this case of supply and demand breaks down into something more problematic is when import duties and tariffs that will inevitably be passed down to the consumer are tacked on to the cost of products.
“Before the tariffs were coming into play, I had really high hopes of additional markets in China for our cotton. And that has obviously slimmed. South Carolina peanut exports, same thing,” Kantrovich said.
The most significant current challenges to U.S. agriculture, according to Kantrovich, are: uncertainty over international trade policy through negotiation; potential partners in the Trans-Pacific Partnership —a trade agreement signed in 2016 but from which the U.S. withdrew its signature — have gained markets at America’s expense; and the European Union and Asia are looking at other partners besides the U.S. to supply ag and other products.
“The European Union, at least publicly, is not budging on a number of issues that directly affect U.S. ag industry’s access to their market,” Kantrovich said.
Kantrovich said the U.S. is also experiencing lost opportunity in its hog markets, with Canada now filling a greater portion of Chinese demand. A similar situation is occurring with Russian pork producer Cherkizovo, which is hoping to begin supplying pork to China and is already in discussions with China on a joint venture, Kantrovich said.
“If this begins to follow through, that has a dollar value on every head of pork we’ve got sitting there,” he said.
Still, those uncertainties over profitability take a toll on American farmers. A poll commissioned by the American Farm Bureau Federation found that about 91% of farmers and farm workers have financial issues that affect their mental health and 87% of farmers are afraid they’ll lose their farms.
For those reasons, Clemson Agribusiness Extension Associate Scott Mickey said chronic stress is a common response to the challenging economic conditions farmers are facing.
While tariffs are hindering the agricultural economy nationwide, the impact varies depending on the product. Peanuts are primarily a domestic product, for example, and thus less affected by trade restrictions and tariffs than another Southern staple crop, cotton, which is largely exported.
For peanuts, while the U.S. saw roughly the same planted acreage of 1.425 million acres as it did in 2018, the harvested acreage was up 1% at 1.383 million acres and the yield was up 2% to 4,080 pounds per acre — not far off the record yield of 4,211 pounds per acre in 2012. Ending stocks are also projected to be down some 1.1. million tons.
Clemson Professor of Agribusiness Nathan Smith said that peanut acreage is likely to hold or decrease slightly in 2020 and a slight improvement in consumption is expected with exports holding strong historically.
As for cotton, Smith said production is up in 2019 both nationally and globally as world demand and consumption on cotton grows, and stocks are expected to increase in 2020, but Smith said the current trade war is undoubtedly impacting the cotton market.
“We had cut down on exports to China because China was reducing their stocks — using some of their cotton — and we were exporting cotton to other countries like Vietnam, Bangladesh and Indonesia,” Smith said. “But also the economic slowdown has pushed prices down … and unlike peanuts, cotton is very dependent on the global market and global economy.”
But while trade negotiations with China will clearly play a substantial role in the U.S. agricultural outlook for the foreseeable future, Extension associate Bernt Nelson said that there are recent “concrete reasons to say” that progress is being made on that front.
“China is out of protein,” he said. “They are short approximately 10 million metric tons of pork. That is a lot of meat. If we gave them our entire year’s production, we could not make up for that.”
Nelson also said three Asian countries — Japan, China and South Korea — account for 51% of all U.S. beef exports. He noted beef export sales have been excellent in recent weeks and would continue to be a market driver.
“There’s two things the U.S. can produce better than anyone else in this world and they both go hand in hand: good corn leads to good beef,” he said. “Good grass. Good management practices. We have good beef. The world likes what we have to offer. We have a superior product, and they want it.”
Source : clemson.edu