A monthly survey of bank CEOs in 10 Midwestern states shows a dismal outlook. The report shows the February score fell to 38 on a zero to 100 scale, where 50 is growth neutral. Creighton University economics professor Ernie Goss is author of the report.
“The numbers were not good, falling below growth neutral for the 17th time in the past 18 months. Now I have to say, though, that livestock doing much better than grain. In other words, we separated out grain to livestock, livestock, particularly beef, doing much better. And I would probably put that number in positive territory, but the grains definitely in the negative territory. Commodity prices in terms of grain just too low back probably below break even for most of the farmers in our survey region.”
Goss says trade is the primary downward driver.
“The dollar is up pretty strong, and that makes our goods less competitively priced abroad. A global economic slowdown certainly not helping out there, and certainly a supply over, I would argue, an oversupply from some of our competitors, such as Brazil and Argentina, pushing, pushing down, prices are Holding, holding them down. I should say prices have improved a bit over the last month or two, but still not in a territory that makes the farmer feel good about what that farmer is making.”
And where there are tariffs, Goss said there will be retaliation by our trading partners.
“For example, in Mexico, you’re talking about a 47 to 48% of the corn or grain price grain from this part of the country goes to Mexico. And then, if you can include, and that’s including pork, then if you look at China, lot higher proportion of the soybean goes to China. So all those tariffs will result in my judgment with retaliation, and that again pushes down the ag economy, and that that that’s pushed down confidence among the bankers who are reporting for the farmers out there.”
But he says there are positives as well.
“Agricultural commodity prices on grain side have rebounded a bit. Now, on the cattle side, the prices have come down somewhat, and what we’re seeing again, in the US domestic market is some weakening, weakening demand for beef, I should say, and that that’s holding down or pulling down beef prices. Beef prices still remain in a pretty solid, good range, providing good profits for those ranchers.”