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Key Risks Keep Ag Outlook Cool

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The Kansas City Federal Reserve Bank says the outlook for agriculture remains down, but is beginning to show signs of stabilization. The bank notes that while aggregate measures of farm income are significantly lower than in previous years, the farm income forecast for 2017 was relatively unchanged from the 2016 estimate. Although farm income was expected to stabilize, growing inventories and trade uncertainty remain key risks to the outlook. High yields boosted production of corn and soybeans to near-record levels for the fourth year in a row, creating higher inventories and an expectation of prices holding at lower levels.

Alongside growing domestic supplies, demand from exports and international trade have become more important, but agricultural producers and bankers have expressed concerns over increasing foreign competition and uncertainty surrounding trade deals, such as the North American Free Trade Agreement. In the cattle sector, price variability is a primary concern, but, despite larger inventories, prices and net margins are above year-ago levels.

Source: NAFB News Service