CoBank issued its Quarterly U.S. Rural Economic Review, finding cautious optimism prevails across the U.S. agriculture sector.
Despite emerging economic weakness in China, turmoil in Ukraine, and severe winter weather in the U.S., the global economy appears to be gaining momentum, according to the report. The prolonged recession has ended finally in Europe, and the impetus for global growth has shifted from China and the emerging markets to the developed economies.
The underlying growth momentum in the U.S. economy has been muted – and clouded – by the severe winter that has impaired consumer spending, construction, motor vehicle sales, inventory adjustments and industrial production. Yet the medium-term U.S. economic outlook still looks robust, with a pick-up in growth expected for the rest of 2014 and 2015. Indeed, reduced debt levels, rising home prices, and steady job and income growth in coming months should support a strong consumer rebound.
U.S. monetary policy will remain accommodative even as the Federal Reserve continues to unwind its quantitative easing initiative, and fiscal policy will also remain accommodative with less fiscal drag and less political theatre since budget and debt ceiling agreements have already been reached. Against this backdrop, the U.S. economy is poised to resume its role as a major engine of growth for the global economy, with the U.S. dollar continuing to strengthen against the major traded currencies.
Record-high animal protein and dairy prices, lower grain and oilseed prices, and steady-to-lower cropland values reflect an agricultural market in transition.
For much of 2013, milk powders stole the dairy market headlines. So far this year, it has been the cheese market’s turn to capture attention. The climb to higher prices was swift. From Jan. 1 until Feb. 1, 40-lb. cheese blocks at the CME rallied from $2.02/lb. to a record high of $2.36/lb.. They stayed there just three days. But after falling back into the $2.10-range, the cheese market caught a second wind, establishing a new record at $2.42 on March 19.
Unlike powder stories where plotlines are almost exclusively international, the cheese market tale has a more domestic flavor. To a large extent, Idaho appears to be ground zero. Milk production there has fallen short of expectations, where for most of the second half of 2013, output lagged prior year levels. While Idaho’s production has picked up of late, it still is below what most analysts would expect given current prices and economics. Cow numbers there are down 11,000 head year-over-year (compared to gains of 1,000 in California and 3,000 in Michigan). In short, it is difficult to make more milk if the cow herd isn’t big enough.