Economist Terry Barr predicts agriculture will weather uncertain times well.
Terry Barr, senior director of CoBank’s Knowledge Exchange Division, delivered the closing address to Alabama Farmers Cooperative Inc. members during breakfast Feb. 23, the last morning of AFC’s annual membership meeting.
Utilizing a series of graphs, charts and figures, Barr painted a picture of the near future for U.S. agriculture that could be summed up in one word: uncertain.
"Agriculture will face some challenges in the next year or so," Barr said, calling the country’s current political situation "dynamic," and advising farmers and farm-related business owners to "expect the best, plan for the worst and prepare to capitalize on the new reality."
His words echoed those of keynote speaker Nate Booth, who kicked off the 80th annual meeting with insight for dealing effectively with change – a fact of life with which every farmer is well acquainted.
"What he [Barr] told us was, it’s all uncertain," said Goshen Farmers Co-op board member and AFC board member Bill Sanders.
Sanders, who’s been farming more than 40 years, said he’s yet to see an average year, but Barr is correct in characterizing the current environment of change as exceptional.
"The changes we’ve seen in the past few years in agriculture have been amazing," Sanders said. "And there will be more changes in the next five years than we’ve seen in the past 10."
Among those adjustments Barr forecast will be the yet-unknown effects of an aging population in the world’s advanced economies. This demographic shift will force major political changes, and half the world’s gross domestic product is tied up in economies struggling with the transformation.
The United States is at the epicenter of the current uncertainty due to the recent administration change and the new priorities and attitudes that accompany it. Recovery from the worldwide economic recession continues, but as Barr pointed out, the dip was deeper than expected and recovery has been slower than in a typical business cycle.
Still, Barr predicts continued, steady growth in the U.S. economy – at 2 to 2.5 percent – with the U.S. consumer in the driver’s seat. At the same time, the Federal Reserve will likely continue to move away from their former zero interest rate policy, and U.S. business will react accordingly. In the midst of these adjustments, the 2018 Farm Bill debate has begun and will continue, affected largely by the nation’s budget deficit.
The good news for U.S. farmers is that the demand side of their economic reality has been strong and will continue to be so. The supply side, according to Barr, is where problems may arise. This imbalance will drive much of what happens globally in agriculture over the next year or so, causing a potential shift in 3.5 million acres of U.S. farmland, with, Barr predicts, increases in soybean and cotton acreages and decreases in wheat and corn.
At the same time, the rebuilding of the U.S. cattle herd is ongoing and all animal protein prices are falling as a result. Increased global milk production continues to push dairy prices lower as well, making export markets a critical component of the industry’s success.
Overall, Barr said ag prices will continue to adjust as crop prices stabilize and, for farmers, this will mean one thing: A farmer’s ability to control costs will contribute significantly to his success over the next year to 18 months.
"In short, I believe agriculture is well positioned to adjust to the dynamic period we are in," Barr said in closing.
Ricky Cornutt, DeKalb Farmers Co-op, agreed wholeheartedly.
"He was spot-on. He told it like it is," Cornutt said after hearing Barr’s outlook. "We are in volatile times. We know that times can change, but maybe some good things will come out of this new administration."
Bringing the discussion full circle, Sanders applied Barr’s forecast and advice to the future of AFC.
"We have 80 years of experience to know that you cannot stand still and expect to succeed," he said. "You have to have a forward vision and a plan. We have exceptional leaders with just that sort of vision, and I’m very optimistic about the future of AFC and our stores."
A nationally recognized expert on agricultural economics, Terry Barr served the National Council of Farmers Cooperatives in Washington as chief economist for 24 years. His time with NCFC followed a 14-year career within the U.S. Department of Agriculture, where he served within the Office of the Secretary of Agriculture as director of economic analysis. He has been with CoBank, a $125 billion cooperative bank serving the needs of rural America as part of the Farm Credit System, since 2009. Barr holds a doctorate in economics from Washington State University.