Kohl acknowledged the currency manipulations that go on by other countries, including China and Mexico, to improve their market competitiveness globally, and he said that is something to watch both in the trade negotiation processes and in terms of economic factors affecting agriculture, particularly as the U.S. has pulled out of the Trans Pacific Partnership, “leaving China to fill our spot, so now Canada and Mexico are in the TPP and they are making agreements without us there.” He also noted that 3 of every 7 consumers with money to buy goods reside in Asia, but the U.S. He observes that 47% of the Mexican population is under 25 years of age, and that “This youthful population of consumers helps fuel continued growth in U.S. exports more ag products to Canada and Mexico, combined, than to China.
During a conference in Mexico, he learned that those buyers will go elsewhere and pay more for dairy if they need to.Īnd while Asia, and China, are important export destinations for farm products, Kohl said that NAFTA re-negotiations are important because the U.S. is exported somewhere, and 39% of those exports are going to Mexico. On the trade issues, Kohl said that 1 out of 7 days’ worth of milk production in the U.S. “When I see the bottom third of producers making good money, that’s when I know we will see financial issues within the next two years.” “The high prices of 2014-15 brought in some inefficiencies,” said Kohl. Right now, he said, the problem for dairy is that we are working through a surplus. He travels extensively, especially during meeting season, and he said it is his ability to go out and confirm the numbers that allows him to see trends and connect dots. Trade has become integral to the marketing, pricing and distribution of farm commodities, including dairy, according to Kohl. What makes the difference for ag, according to Kohl, is the economic growth of export partners. While it is true that as the economy improves and consumers have more money in their pockets, the food processing and foodservice sector positions have improved, the problem is that the farm sector tends to ride at the back of that bus. “One-third of the consumers with money reside within 10 hours of you,” he said. We shall see.Īs he went through the indicators, Kohl indicated his bullishness on agriculture in the East. In fact, the report released that day pegged it at 2.6%. If it stays below 3%, there will be less incentive to raise interest rates. Kohl sees the Fed raising the prime rate possibly four times in the coming year, but that will depend on the rate of inflation. We are well into this period of low flat interest rates, but that is about to change.” “When the dollar is weaker, it picks up inflation, so we have to watch out for higher interest rates. “When the dollar is stronger, we are in a weaker position to trade commodities,” said Kohl. dollar because this will influence inflation and interest rates in the general economy as well as exports in the ag economy. Kohl is watching what happens with the U.S. rural economies is the strength of the dollar and the price of oil that coincide. Part of the reason for these opposite fortunes for urban vs. The fact that he is a partner in a creamery is just ice cream on top of the cake. His high energy presentations deliver tidbits of insight that help make sense of market patterns that are so difficult to understand. When Kohl is on the agenda for a meeting, you know you are in for an invigorating look at socio-economic trends, and a whole lot more. Kohl, who spoke about positioning for success in the economic reset as the keynoter for the annual Univest Ag Summit that drew over 350 people - mainly farm families and many of them dairy producers - to Shady Maple Smorgasbord here last Friday, Jan. The ag economy tends to run counter to the general economy.”Īnd with that, we were off to the races with Dr. He then opened eyes, and ears, saying that, “When the urban and suburban economies are going gangbusters, the ag and rural economies tend to struggle. David Kohl, Virginia Tech professor emeritus. – “The growth of the economy is hotter than a pepper sprout, but for how much longer?” observed Dr. Kohl connects dots, prepares farmers for economic resetīy Sherry Bunting, reprinted from Farmshine, February 2, 2018ĮAST EARL, Pa.