Transcript “Trumping” the Economy and Agricultural Policy

“Trumping” the Economy
and Agricultural Policy
Outlook Update
February 2017
Larry D. Sanders
The bottom line…
• Dec 2016:
– General economy in
pretty good shape
– Ag economy at
crossroads facing
crisis or resurgence
• 2017:
– Tug/pull between
Trump and Fed
– Regulation relaxation
– Trade, foreign
economies, energy
markets & weather
uncertain
2
Leaving 2016 behind
•
•
•
•
Consumer spending and Gross
Domestic Product are at record levels,
while Federal government spending is
down
– GDP growth rate last quarter 3.2%
– GDP debt to GDP remains high
(104%)
Wage and salary growth have
recovered from the 2008 meltdown
(4.3%)
Federal deficit has declined
Inflation rate remains relatively low
(1.6%; food price deflation)
•
•
•
•
•
$ has strengthened
Unemployment is down and more jobs
are being created
U rate 4.6%
Interest rates low (0.5%)
Commodity prices are down after
record years
3
4
5
6
7
The General Economy in 2017:
Tug/pull between new President, Federal Reserve, Congress & key trading partners
• Fiscal stimulus: increase
inflation
• Monetary policy: limit inflation
& slow growth in GDP
• Deficit likely to increase
• Foreign capital attracted to US
investments
• $ strengthens
• Trade deficit increases
• Unemployment may increase
• Standard of living likely
declines
• Farm asset values likely decline
and farm income will shrink
• Reduced staffing in federal
farm offices such as FSA and
NRCS
• Suggests longer waits/more
difficulty to get assistance,
benefits
8
US NET FARM INCOME & DIRECT GOVERNMENT PAYMENTS
(1991-2016F)
$
Billion
net farm income
govt payments
NFI-G
150
100
$66.9
b.
50
$54 b
$12.9
b.
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
0
9
Note: OK producers received $1 bil. in direct govt. payments in 2014.
US INFRASTRUCTURE: A FOCUS FOR PUBLIC-PRIVATE
FUNDING (AS MUCH AS $3.6 TRILLION NEEDED BY 2020)
Public Infrastructure
systems
Funding gap (needsest. funds) $billion
2013
Surface transportation
846
Water/wastewater/waterw 100
ays/ports
Electricity
107
Airports
39
Dams/levees
89
Hazardous/solid waste
46
Parks/rec
104
Rail
11
schools
271
TOTAL
1,611
http://www.infrastructurereportcard.org/a/#p/grade-sheet/americas-infrastructure-investment-needs
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https://www.washingtonpost.com/graphics/national/maps-of-americaninfrastrucure/?hpid=hp_hp-top-table-main_gfx-infrastructure320pm%3Ahomepage%2Fstory
11
Lower Bulk Export Prices and Greater Export Competition
152.3
134
Records
114.2
112.5
Exports
43
Imports
Trade Surplus
Updated by Sanders
http://www.fas.usda.gov/data/trade-agreements-createopportunities-us-agriculture
13
2016: GOP Red; Dem Blue
https://www.washingtonpost.com/2016-election-results/us-presidentialrace/?hpid=hp_hp-bignews4_map-desktoppromo%3Ahomepage%2Fstory
Cartogram: map re-scaled
according to vote within
counties
https://www.washingtonpost.com/graphics/politics/2016-election/how-election-maps-lie/
14
Trump Policies Related to Ag & Rural America?
1.
2.
3.
4.
5.
6.
7.
Limit immigration
Kill TPP; revisit all in-force trade agreements, esp. NAFTA
Kill/revisit climate change agreements
Expand infrastructure programs (roads/bridges)
Reduce regulations
Eliminate or reduce EPA
Separation of farm programs and food/nutrition programs in
next farm bill
8. With exception of Defense and ICE, general reduction of
government—it will be smaller
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The next farm bill…
2018…2019…2020…???
• 2014 farm bill was a 5-yr bill
expected to last thru 2018
• Discussions have begun
• Risk management continues to
be the framework--crop
insurance focus
• Maintain omnibus concept or
split off food programs?
• Specialty crops and
conservation as compromise
issues?
• The “Team” that will
write/move the farm bill
SENATE
HOUSE
Pat Roberts
(R-KS)
Michael Conaway
(R-TX)
Debbie Stabenow
(D-MI)
Collin Peterson
(D-MN)
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Oklahoma
“A rose by any other name would
smell as sweet”
-- William Shakespeare, Romeo and Juliet
THE BUDGET
Source: Oklahoma Policy Institute, “Oklahoma State Appropriations, FY 2007
to FY 2017,” http://okpolicy.org/resources/online-budgetguide/expenditures/state-government-expenditures/appropriations-history/,
Accessed 2/1/17 @ 3 pm
Total Appropriations
Miller, Ken. 2017. “Oklahoma Economic Report: News and Analysis of
Oklahoma’s Economy.” Accessed online
https://www.ok.gov/treasurer/documents/OER_1-31-17.pdf on February 2,
2017 @ 1:30pm
Miller, Ken. 2017. “Oklahoma Economic Report: News and Analysis of
Oklahoma’s Economy.” Accessed online
https://www.ok.gov/treasurer/documents/OER_1-31-17.pdf on February 2,
2017 @ 1:30pm
Source: American Society of Civil Engineers, “2013 Report Card for America’s
Infrastrucutre: Oklahoma.”
http://www.infrastructurereportcard.org/oklahoma/oklahoma-overview/,
Accessed 2/3/17 @ 11:29 am
http://www.infrastructurereportcard.org/oklahoma/oklahoma-overview/
ECONOMICS OF BUDGET DECLINE
Source: Wilkerson, 2017
Unemployment Rates, December 2016
Source: Wilkerson, 2017
Unemployment Rates, November 2016
Source: Wilkerson, 2017
Source: Wilkerson, 2017
Payroll Employment by Industry
Source: Wilkerson, 2017
Selected Housing Indicators
*Percent change year-over-year.
Source: Wilkerson, 2017
Exports
Source: Wilkerson, 2017
Manufacturing Activity
Plant Level Indicators
Composite Index
Production
Volume of shipments
Volume of new orders
Backlog of orders
Number of employees
Average employee workweek
Prices received for finished product
Prices paid for raw materials
Capital expenditures
New orders for exports
Supplier delivery time
Inventories: Materials
Inventories: Finished goods
Diffusion
Index^
7
11
7
20
5
3
-4
13
31
-2
-1
5
-3
-3
Source: Federal Reserve Bank of Kansas City, 2017
WHAT MIGHT THE FUTURE HOLD?
Source: Wilkerson, 2017
$53.55/
barrel
2/2/17
Source: Energy Information Agency, “Daily Prices.” Accessed online
http://www.eia.gov on 2/3/17 @ 11:45 am
Oil (WTI-Cushing) Prices
$3.12/
MMBtu
2/1/17
Source: Energy Information Agency, “Daily Prices.” Accessed online
http://www.eia.gov on 2/3/17 @ 11:45 am
Natural Gas (Henry Hub) Prices
Source: Wilkerson, 2017
Source: Energy Information Agency, “West Texas Intermediate (WTI) Crude Oil
Price Probabilities.” Accessed on
http://www.eia.gov/forecasts/steo/images/Probability_WTI.png 2/1/17 @
10:15 pm.
Source: Energy Information Agency, “Henry Hub Natural Gas Price Probabilities.”
Accessed on http://www.eia.gov/forecasts/steo/images/Probability_HH.png2/1/17 @
10:15 pm
Sources
• Wilkerson, Chad. 2017. “The Oklahoma Economic Databook: A summary
of regional economic indicators for the state of Oklahoma.” Accessed
online
https://www.kansascityfed.org/~/media/files/publicat/research/indicators
data/regionaldatabook/2017/2017-01-24-okrdb.pdf on 1/30/17 @ 11:24
am
• Federal Reserve Bank of Kansas City. 2017. “Tenth District Manufacturing
Activity Continued to Expand Moderately.” Accessed online
https://www.kansascityfed.org/~/media/files/publicat/research/indicators
data/mfg/2017/2017jan26mfg.pdf?la=en on 1/30/17 @ 11:15 am