Maverick's World

My growing sense of concern about the US Ag sector

I have been following some trends in the US Ag sector and I am a little worried about how precarious it seems.

In most parts of the world, the US Ag sector is seen the model for success. Most other nations want to see their Ag sector reach the yield per hectare that US Ag seems to routinely pull off. The success is to yield per hectare, the amount of confidence that a US Ag commodity contract or option carries is something quite extraordinary if you think about how unpredictable the whole process of agriculture is.

But now it seems that the Ag sector is in trouble. Either the price of Ag output is too low or the "real" premium associated with an Ag contract is too high because everyone in the Ag chain is complaining.

The farmers are complaining the loudest. They are saying that the price point is too low and they cannot keep taking out loans that allow them to improve the quality of production (i.e. reliably delivered volume per contract) without taking on essentially unsustainable loans.  If farmers depart from this process of risk reduction, the premiums associated with the Ag contracts will rise.

There is no trivial answer to these complex questions.

It is not a good idea to ignore this problem either as it could lead to a sudden unexpected collapse in farm debt or worse to a sudden sell-off in farms (such as rumors circulating in Lancaster PA are now suggesting).

That Ag debt collapse would be fantastically similar to the collapse encountered during the Great Depression.

With Trump cutting taxes, there is no way to ensure that the USG will be able to borrow enough money to hand out the relief the Ag sector needs in this nightmare scenario. The US would have to risk default on its own debt at that point.

People are openly talking about a "repeat of the 1980s farm debt crisis"[1].

I am 100% certain that Trump and his gang of idiots have no clue what is going on. The Ag "Deep State" obviously know what is going down but with Trump putting his giant ass right where their foot wants to be, I am not sure they are going to make a whole lot of progress containing the situation.

We are heading towards a massively shitty situation. I hope we come to our senses soon and restore a viable political order in DC soon.

posted by maverick @ 7:59 AM