Outlook: Diversity improves resilience
of Southeast ag economy
FOCUS ON THE FARM
DR. BLAKE BROWN
North Carolina State University Extension Economist
CORN, SOYBEANS AND hogs make up a large share of agricultural
income in the Midwest. Agriculture in the southeast is much more
complex. Our farm sector is extremely diverse with only California
matching the size and diversity of southeastern agriculture.
Georgia ranks first, North Carolina second, and Arkansas third in
national poultry production. Georgia ranks first in peanut and pecan
production while North Carolina ranks first in tobacco and sweet
potato production. North Carolina ranks second in hog production
and Christmas trees, while Georgia ranks second in cotton production.
When it comes to fruits and vegetables Florida is surpassed only by
California with plenty of fruits and vegetables produced throughout the
rest of the southeast. The 10 states often considered as southeastern
(Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North
Carolina, South Carolina, Tennessee, Virginia) made up 21 percent
of 2017 U.S. net farm income. North Carolina (the Sunbelt Ag Expo
Spotlight State this year) leads the Southeast in net farm income at
over $4 billion in 2018.
The U.S. farm economy is experiencing a deep economic downturn.
While this is also generally true for southeastern agriculture, the
outlook varies within the southeast depending on which of the diverse
array of crops and livestock is most concentrated in a particular region.
POULTRY AND LIVESTOCK
Poultry production, particularly boilers, has made a strong recovery
since 2012. With continued growth in demand the industry has
followed with considerable expansion in the southeast. Six new
poultry processing plants are expected to be up and running by 2020.
Lower feed prices have also contributed to increased profitability.
Hogs have made a recovery in recent years after overcoming
outbreaks of porcine epidemic diarrhea (PED) and, as with poultry,
benefiting from lower feed prices. However, expansion in pork
production has occurred largely outside the southeast. International
trade developments could have had severe impacts on poultry and
hogs had it not been for the outbreak of African Swine Fever (ASF) in
Asia, particularly in China. China consumes 50 percent of the world’s
pork, producing nearly all of it domestically. ASF has resulted in a large
reduction in China’s swine herd which has increased Chinese demand
for imports of pork and poultry.
Unfortunately, retaliatory tariffs have resulted in a 62. 5 percent
tariff on Chinese imports of U.S. pork and imports of U.S. poultry are
banned due to Avian Influenza. Even so this has resulted in increased
global demand for pork and poultry which indirectly raises demand
for U.S. pork and poultry.
Cattle prices continue to be depressed following a large expansion
in the cow herd. With the expansion in cow herd over prices were
expected to begin some recovery. Unfortunately, the Tyson beef
processing plant fire has dampened prices, at least in the short run.
The Southeast produces a lot of corn and soybeans which face
the same dreary outlook as the rest of the U.S. While wet planting
conditions in the Midwest negatively affected supply (although not
as much as originally expected), ASF in China is negatively affecting
demand for corn and soybeans globally. Retaliatory tariffs by China
further dampens export demand, particularly for soybeans.
Retaliatory tariffs by China have also negatively impacted prices
for cotton as has a larger 2019 cotton crop. Peanut acreage is down,
but prices remain below $425 per ton for runners and most Virginia
types. The outlook for tobacco is dismal with the Chinese stopping all
purchases of U.S. tobacco. This has resulted in depressed prices and
the lowest production in over 75 years.
Southeast fruit and vegetable producers had hoped for some relief
from competition from Mexico in the U. S.-Mexico-Canada trade deal
but the conditions under NAFTA were largely maintained. Even so
the Southeast is well positioned to meet East Coast demand for fruit
and vegetables with demand for some specialty crops like sweet
potatoes and blueberries continuing to grow. Lack of affordable
labor remains a top issue for fruit and vegetable producers as well as
tobacco producers. Prospects are not bright for Congress providing
a better labor package for agriculture given that it is tied closely to
Payments under the 2018 Farm Bill Commodity Programs are critically
important to cotton and peanut producers, with substantial Price
Loss Coverage payments coming for the 2018 crop in October and
payments expected for the 2019 crop in 2020.
Trade assistance from USDA to mitigate the impacts of retaliatory
tariffs will also be important. The Market Facilitation Payments will be
flat rates based on 2018 acres of qualifying crops and the county of the
applying farm. Counties more heavily impacted by trade retaliation
have larger payment rates (such as those with more soybeans and
cotton). The Food Purchase and Distribution Program for agriculture
products impacted by retaliatory tariffs will purchase $1.4 billion of
products including vegetables, fruits, peanut butter, pork, poultry
THE TAKE AWAY
The Southeast remains a competitive region for fruit and vegetable
production with some specialty crops like sweet potatoes experiencing
continued strong growth in demand. Despite retaliatory tariffs and
import bans by China, the outlook for the pork and poultry sectors
Prices for cotton and peanuts remain depressed with farm bill
program payments critical to the vitality of producers. Tobacco
producers face the most dismal outlook with China stopping all
purchases of U.S. tobacco and no assistance from USDA for the damage
caused by China’s trade retaliation.
In the Southeast, the large majority of farmers are diversified, often
across major sectors such as poultry and crops. Few farmers produce
only one type of crop or livestock. This diversity improves the resilience
of the southeastern agriculture sector.
Dr. Blake Brown is the Hugh C. Kiger Professor of Agricultural and
Resource Economics at NC State University and serves as a Senior
Economist for the Council of Economic Advisers in the Executive Office
of the U.S. President.