farmdoc Webinar Coronavirus and Ag · 2020-04-03 · Mar 2019 = 100. Corn Price Agbarometer DJIA Consumer Sentiment. Data: Refinitiv, USDA, University of Michigan, NAHB, Creighton,

Jonathan CoppessUniversity of Illinois

Dr. Robert Johansson USDA Chief Economist

LIVE | Coronavirus and AgOutlook and Farm Policy Moving Forward

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Jonathan CoppessUniversity of Illinois


LIVE | Coronavirus and AgOutlook and Farm Policy Moving Forward


Office of the Chief Economist

In February, net returns were expected up, with lower expected government payments and crop insurance indemnities

Data: USDA-ERS

$140$120$100$80$60$40$20$0

Billion dollars (2020$)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Federal crop insurance indemnities minus premium Direct government paymentsNet farm income minus government payments and net federal indemnities

2


In February, debt-to-assets ratio were forecast to remain low ---13.59%, and financing cost falling despite debt at historic levels

Data: USDA-ERS

“Interest repayment capacity”= Interest Expenses divided by (NFI before interest and taxes)

2020, $425.3B

2020, 15.22%

2020, 13.59%

$500$450$400$350$300$250$200$150$100$50$0

70%

60%

50%

40%

30%

20%

10%

0%

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

Billion dollars(2020$)

Percent

Debt (right axis) Interest repayment capacity Debt to asset ratio

3

Office of the Chief EconomistOffice of the Chief Economist 4

Coronavirus topped macro global economy concerns;markets expecting recovery

0

10,000

20,000

30,000

40,000

50,000

0.85

0.90

0.95

1.00

1.05

# of

Cov

id19

infe

ctio

ns

S&P5

00 a

nd S

hang

hai I

ndex

, Dec

120

19=1 S&P 500 vs Shanghai Composite Index and Corona Infections

# of Covid19 infectionsData: Refinitiv and China’s National Health Commission

S&P500 Index Shanghai Composite Index

U.S. and China reachPhase One agreement

1.10 60,000


That was then, this is now.

5


Private forecasts for US Q2 GDP are unprecedently low (percent is at annualized rate)

015-Mar 18-Mar 21-Mar 24-Mar 27-Mar

% C

hang

eQ

Q

US GDP Forecasts: Q2

-5

-10

-15

-20

-25

-30

-35US GDP: Q2 Linear (US GDP: Q2)

Source: Bloomberg News. Date represents date forecast was reported. Percentage values are annualized rates

6


Weekly initial jobless claims hit an all time record (6.648 million week ending 3/28)

7

-

4,0003,5003,0002,5002,0001,5001,000500

-

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

Inde

x

Indi

vidu

als

S&P and initial jobless claims

Jun-68 Dec-73 May-79 Nov-84 May-90 Oct-95 Apr-01 Oct-06 Apr-12 Sep-17 Initial jobless claims S&P Index


Restaurant reservations hit bottom on March 20

20

0

-20

-40

-60

-80

3/10 3/17 3/24

% C

hang

eYY

OpenTable Reservations (3/30): U.S. YY

-1002/18 2/25 3/3

Source: OpenTable % change from prior year. Date as of 3/30/2020.

8


US Dollar has appreciated against most currency, emerging markets in particular

Source: Refinitiv. Percentage changes as of closing March 30th, 2020

-5% 0% 5%

USD Denominated Exchange Rates, YTD

Australian dollarUK pound

Japanese yenEuro

Chinese yuan Argentina peso

South Korean won Canadian dollar Russian rouble

Brazil realMexican peso

10% 15% 20% 25% 30% 35%YTD

9


Stock prices have declined across most of the agricultural and food industry

-10% 0% 10%

Dupont SyscoCF, Industries TysonBayer ADMConstellation Brands DeereS&P Index Coca Cola Corteva Conagra WH Group Del Monte Kellogg Pepsi Mondelez Walmart Costco KrogerGeneral Mills

Ag. & Food Stock Prices, YTD

-50% -40% -30% -20%


10


Ethanol margins have declined significantly recently

0.250.200.150.100.050.00

-0.05-0.10-0.15-0.20-0.25-0.30-0.35-0.40-0.45-0.50

Jan-19 Jul-19 Jan-20

Ethanol producer margins

Dollars per gallon U.S. ethanol total cost marginsNebraska daily average

Data: OPIS, USDA/AMS

11


Agricultural commodities most closely linked to macroeconomic conditions have seen largest declines

-30% -25% -20% -15% 0% 5% 10% 15%

Lean HogsLive CattleCornCotton Wheat, Spring Wheat, SRW Milk IIIWheat, HRW Soybeans Rice

Ag. commodity futures prices, YTD

-10% -5% YTD


12


Planted acres up from prior yearCrop (mil. acres) 2016 2017 2018 2019 2020 %∆

Corn 94.0 90.2 88.9 89.7 97.0 8%Soybeans 83.5 90.2 89.2 76.1 83.5 10%

Wheat 50.1 46.1 47.8 45.2 44.7 -1%All cotton 10.1 12.7 14.1 13.7 13.7 0%

Other feedgrains 12.6 10.7 11.0 10.8 11.8 9%Rice 3.2 2.5 2.9 2.5 2.8 12%

Total 8 crops 253.4 252.3 253.9 238.0 253.5 6%CRP 23.9 23.4 22.6 22.6 22.7 0%

8 crops + CRP 277.3 275.7 276.5 260.6 276.2 6%

Source: USDA-OCE. Area planted. Values in red denote record levels. 2020: NASS Prospective Plantings, except for CRP

13


Soybean to corn price ratio has moved up recently

14


Corn Basis for Week Ending March 27thHighlighted Counties 1 st. dev. from 2009 - 2019 Average Basis

Cents

< 1 st. dev.> 1 st. dev.

15


Corn Basis Change for Week Ending March 27th from Jan. 2020

Cents

16


Soybean Basis for Week Ending March 27thHighlighted Counties 1 st. dev from 2009 - 2019 Average Basis

< 1 st. dev.> 1 st. dev.

Cents

17


Soybean Basis Change for Week Ending March 27th from Jan. 2020

Cents

18


[As of March WASDE]

Item 2016 2017 2018 2019 2020 %∆Billion pounds

Beef 25.3 26.3 26.9 27.2 27.7 2%Pork 25.0 25.6 26.3 27.6 29.0 5%

Broilers 40.3 41.2 42.6 43.9 46.1 5%Total1 97.6 100.2 102.4 105.3 109.4 4%

Billion poundsMilk 212.5 215.5 217.6 218.4 222.3 2%

Source: USDA-OCE. Values in red denote record levels. Values as of March 2020 WASDE.

19


Futures reflecting downturn in expected prices

20

Item ContractSettle

(4/1/20)

Change fromprevious day

(3/31/20)

Change from 1stUS Covid-19 (1/21/2020)

One year ago1

52-week low2

52-week high2

Continuous nearby commodity futuresWheat, SRW ($/bu) 20-May 5.5 -0.19 -0.31 4.67 4.19 5.82Wheat, HRW ($/bu) 20-May 4.75 -0.18 -0.25 4.35 3.62 5.01Wheat, Spring ($/bu) 20-May 5.25 -0.15 -0.38 5.36 4.67 5.7Corn ($/bu) 20-May 3.35 -0.06 -0.53 3.63 3.35 4.55Soybeans ($/bu) 20-May 8.63 -0.23 -0.53 9 7.91 9.44Cotton (¢/lb) 20-May 48.41 -2.72 -20.83 77.45 50.7 78.92Rice ($/cwt) 20-May 14.06 0.02 0.64 10.68 10.16 14.29Live Cattle (¢/lb) 20-Jun 87.58 -4.5 -38.8 126.37 91.85 128.53Lean Hogs (¢/lb) 20-Apr 49.2 -3 -18.15 78.81 53.95 92.38Crude Oil (WTI, $/bbl) 20-May 20.9 0.42 -37.44 62.36 20.09 66.3OtherS&P 500 Index 2,468.26 -116.33 -852.53 2,875.99 2,237.40 3,386.15ICE U.S. dollarIndex 99.5 0.45 1.97 97.28 94.9 102.82


How optimistic are you about economic prospects over thenext 6 months?

8070

140130120110100

908070

9 = 10014013012011010090

Mar 2019 = 100

Corn Price Agbarometer DJIA Consumer Sentiment

Data: Refinitiv, USDA, University of Michigan, NAHB, Creighton, NAHB, Purdue/CME

Rural Mainstreet Housing Market

Slow planting progress and increased trade tension

Corn price increases with the knowledge of widespread prevent plant.

Mar 201Signing of the phase I trade deal with China

21

COVID-19 hits the U.S.


Last recession

22

$200

$150

$100

$50$0

($50)

($100)

($150)

Bill

ion

(202

0$)

Food Expenditure

Data: USDA-ERS

Jonathan W. CoppessDirector, Gardner Agriculture Policy ProgramDirector, Bock Ag Law/Policy ProgramClinical Assistant ProfessorUniversity of Illinois

Agencies and Rural Businesses

Additional funding for inspectors: meat, poultry, eggs, plants, grains, etc.

Additional funding for loans to rural

businesses; and for telemedicine and distance learning

services.

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

APHIS AMS FSIS FAS FSA InspectorGeneral

COVID-19 Relief: Funding for USDA

Operations by Agency

$20,500,000

$25,000,000

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

RuralBusiness-Cooperative

Service

RuralUtilitiesService

Funding for Rural Businesses and Services

Assistance for FarmersFunding Related to Assisting Producers

0

5

10

15

Office of the secretarty CCC Reimbursement

$9.5 billion fund specialty crops, local food systems, farmers markets and schools; livestock and

dairy

$14 billion reimbursement

to Commodity Credit Corporation; covering

expenditures.

Billi

on D

olla

rs U

.S.

Estimated Expected CCC Expenditures FY2020 (CBO and CCC)

-$9.69

-$8.33

-$4.37

-$2.23-$1.86 -$1.58

-$0.88 -$0.69

-$10.0

-$7.5

-$5.0

-$2.5

$0.0

MFP2019(traunch

2 & 3pmts)

MAL Loans Made

(FY19-CCCReport)

Transfer toNRCS &Other

Agencies(FY19-CCC

Report)

PLC(CBO

March 2020)

ConservationReserveProgram

(CBO March2020)

ExportActivities(FY19-CCC

Report)

Dairy andOther

Payments(CBO March

2020)

ARC(CBO March

2020)

in B

ILLI

ON

Dol

lars

U.S

.

Food AssistanceFunding Related to Food Assistance

$15.51

$8.80

$0.45$0

$5

$10

$15

$20

FNSSNAP

FNSChild Nutrition

FNSCommodityAssistance

in B

illio

ns

Food AssistanceSNAP Spending and Participation (USDA-FNS)

26.328.2

33.5

40.3

44.746.6 47.6 46.7

0

5

10

15

20

25

30

35

40

45

50

$0

$10

$20

$30

$40

$50

$60

$70

$80

2007 2008 2009 2010 2011 2012 2013 2014

Mill

ions

of P

eopl

e

Billi

ons

Total Costs

Avg. Monthly Participation

SNAP: Counter-cyclical (e.g., Great Recession); expectations with nearly 10m people filing for unemployment in 2 weeks; CARES provides $15b contingency but not increased benefits.

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farmdoc Webinar Coronavirus and Ag · 2020-04-03 · Mar 2019 = 100. Corn Price Agbarometer DJIA Consumer Sentiment. Data: Refinitiv, USDA, University of Michigan, NAHB, Creighton,