The Recession Is Over’ Says Ag Economic Expert

At the end of all my presentations on the farm sector, I always state that weather was the ultimate key variable. At the 2020 NFPA IEOC, I also noted that the problems in 2020 were being further exacerbated by the China tensions, the COVID-19 pandemic, and the uncertain political outlook and the resulting economic policies.

All these factors have changed! The dramatic reversal of the negative influences on the farm sector literally began during the NFPA IEOC. The result has been the end of the farm equipment recession and a high probability of at least a double-digit gain in demand in 2021 rather than the projected modest improvement; Happy Days Are Here Again.

What happened

At the NFPA IEOC, the underlying fundamentals suggested that 2020 would be the seventh year of the farm recession:

Great yields and increased acreage for the past six years translated into bumper crops and excess U.S. carryovers depressing commodity prices.

The COVID-19 pandemic dramatically reduced U.S. and global economic activity.

Uncertainty was increasing about the political outlook and economic policies.

As the NFPA Aug. 11-13 IEOC came to an end, a major weather pattern called a derecho developed beginning Aug. 10-11 and rampaged through the Midwest, significantly affecting Iowa, Nebraska, Illinois, and Indiana. (A derecho is a widespread, long-lived, straight-line storm with 100+ mph winds, extremely heavy rains, and an occasional tornado). Over the next few months, we learned of the widespread damage to tens of millions of acres impacting the corn and soybean crops that were still in the ground. Compounding the developing problems was the impact of dry weather over the summer in several regions and rising export demand as global economies began to recover. The bottom line was a less-than-robust harvest than what was projected in the July USDA WASDE (World Agricultural Supply and Demand Estimates) report published Aug. 12. Further impacting the farm sector was an increase in demand for wheat, corn, and soybeans reflecting the COVID-19 effect of higher consumption of dinners and baked goods at home. As we entered the fall, the crop forecasts of corn and soybean carryovers and prices changed dramatically.