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Floodwaters surround a farmstead in this aerial photograph over Pacific Junction, Iowa, U.S., on Saturday, March 23, 2019. The deluge that devastated so much of the Midwest and could lead to significant loss of corn and soybeans in storage and disruptions to spring planting.
“Until agriculture turns around for the Midwest, when it comes to grain commodities and some of the proteins and dairy, we know that there’s going to be a negative impact on the ability for those local communities to generate economic growth,” Kowalski said.
Rural communities are feeling the pinch as U.S. net farm income remains well under peak levels set in 2013 during record prices for some major crops.
“Fortunately, before we came through this multi-year downturn things were really good in agriculture so that’s carried over and enabled a lot of producers to cut back and weather the storm,” said Kowalski. “But that will become increasingly difficult for producers … if things are the way they have been for much longer.”
According to Kowalski, if farmers go through the growing season and see major crop prices at about the same level, that could result in more agricultural producers exiting the sector.
Dairy farms in the upper Midwest have been especially hit hard by the current agricultural downturn and some smaller operators have been forced into Chapter 12 bankruptcy. But Kowalski said help maybe on way since milk prices could potentially increase in the second half of the year, helping struggling dairies.
Regardless, Kowalski said the dairy and protein sectors are generally more sensitive to the global economies than corn and soybeans so the current economic slowing is a concern.
“Beef is the most expensive commodity to consume, and so when you’re looking at a potential downturn in the global economy, beef is the most responsive to that and then it would be pork and chicken, because of the premium nature of the prices,” he said.
About 14 percent of U.S. beef gets exported overseas and for pork it is over 20 percent, according to the U.S. Meat Export Federation.
Finally, Kowalski said certain Asian markets such as Japan have been strong for U.S. beef, but the global slowdown threatens growth. U.S. pork exports to South Korea shattered records last year and were up 40 percent in terms of volume but could slow if consumers pullback in that market.
“There is going to have to be an adjustment, but we don’t foresee it being a major step down in what we export,” he said.
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