By former USDA Secretary John R. Block.
Hot issues of the day – Are we going to war with Iran? They did shoot down one of our drones worth more than $130 million. News reports tell us that in response, President Trump agreed to a retaliatory strike against Iran. But then at the last minute he called it off. War hawks criticized him for backing down. I support the President’s decision. He is giving Iran one last chance to behave like a nation should. Now if Iran can’t clean up their act, they will pay a big price.
Let’s take a look at the Ag Industry. Farm income has been cut in half in the last 4 years with income down, bad weather, and a trade war, the challenges continue to mount.
We are experiencing the highest level of farmer difficulties in 7 years. The Federal Reserve Bank of Kansas City reports producers hold $427 billion in debt – the most since the 1980 farm crisis. And when farmers suffer, so do the companies that sell to them. How many new tractors and combines will we buy? Not very many is my guess.
There is a silver lining to these storm clouds. – We just have to survive to take advantage. First, with President Trump and President Xi meeting this weekend, we can hope they can begin ending the trade war. China’s Vice Minister of Commerce says, “We should meet each other half way. Both sides will need to compromise.” I said last week that both presidents can be stubborn, but there is a good reason and pressure to negotiate a deal. President Trump will be running for reelection. He needs a victory and there are some reasonable concessions President Trump could make for President Xi.
There is one other development that can help the Ag industry – higher prices. With the floods and terrible spring weather our crops will be short. We are already seeing higher prices for some products. It’s too soon to know how much our yield is cut. I know you would remind me if we don’t have very much crop to sell, a higher price won’t help. However, over time if your surplus is cut in the next year or two, we will benefit. In the meantime, government support programs, including crop insurance, will help to support farmers and ranchers. We have lived through tough times before and we can do it again.
John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill. If you would like to review his radio shows going back more than 20 years, just go online to www.johnblockreports.com.