Analysis of current economic conditions and policy
Farm PPI and Prospects for the Farm Sector
The PPI for farm products was released yesterday.
Figure 1: PPI for farm products, 1982=100. Light orange shading denotes Trump Administration. Source: BLS.
Farm commodity prices have been depressed by trade retaliation spurred by US tariffs imposed under Section 232 and Section 301, as well as the strong dollar associated with expansionary fiscal policy.
Farm net value-added follows the PPI for farm products. Using an error correction model over the 2005Q1-2018Q2 period, I forecast 2018Q4 farm value-added will drop by about 5% (log terms).
Figure 2: PPI for farm products (blue, left scale); farm net value added in billions of dollars, SAAR (black, right scale), and forecast from error correction model imposing unitary long run elasticity (red, right scale), plus/minus one standard error (pink lines). 2018Q4 PPI observation for October-November. Light orange shading is Trump Administration. Source: BEA, BLS, and author’s calculations.
13 thoughts on “Farm PPI and Prospects for the Farm Sector”
pgl
Can’t wait for the Usual Suspects to note that farm net value added fell during Obama’s 2nd term. Of course it also skyrocketed during Obama’s 1st term.
Bruce Hall
pgl, well, yes… I’m waiting for your analysis of the reason why agricultural prices spiked… and then declined “before Trump” (aka Obama). Maybe it was the fear of Trump? Or maybe commodity prices are volatile for a number of reasons.
pgl
Bruce wakes up in a bad mood,. Hey Bruce – I have NEVER attributed market price changes to which party is in power. That is your game. I attribute changes in prices to things like economics and actual policies. Maybe you will one day grow up and do the same. But doubtful.
BTW – take a course in American history. GEESH!
Bruce Hall
pgl, I believe you brought up the anomaly; I only asked if you had an explanation. And to the extent that the markets reflect the economy, I believe you have made many comments about the party in power… which seems to have a relationship to “actual policies”. Seems to me I recall a post on this site speculating about a “hidden recession” in ’15-’16.
You can now go back to being an apologist for the Chinese government… or the Irish “social justice miracle.”
pgl
My apologizes for the Chinese government? Now you are reading things that are not even there. BTW – I did provide my explanation later. But of course you missed it as it was basic economics.
macroduck
Obama price decline and rise: Lower global incomes than expected means lower consumption of meat than expected. Meat production is a major source of demand for grains.
Maybe we have an agricultural economist out there that can answer that question. People are so happy to blather in the comments section up and until the point you ask them a flat question, then they have nothing to say. What say ye, Masters degree credentialed Ag Economists??? Not one out there??
pgl
Census data on U.S. exports of food products from 2008 to 2017:
Interestingly, these exports rose from $87.3 billion in 2009 to $135.3 billion by 2014 but slipped after that. Increased foreign demand for U.S. food may have been a factor in its price increasing until around 2014. Less foreign demand following that may have something to do with the price decreases.
Of course we had dollar devaluation for a while but dollar appreciation starting in 2014. And we had basically free trade until 2017.
But hey – why think in terms of economics when the Usual Suspects just do D versus R!
The highlight of this discussion of donald trump: “His inability to recruit, or to even to listen to, top people has hampered everything from Trump’s foreign policy to his own legal defense. His hostility to sound advice, coupled with reliance on his frequently terrible instincts, has produced a kind of synergy (to use a newly infamous word) of incompetence in the White House and beyond: Things go wrong on the world stage, Capitol Hill or with the media. Trump never blames himself, instead blaming everyone else, including the people who work for him. Experts — also known as people who know what they’re doing — have had two years to observe this and have understandably become less willing to work for him. Their numbers inside the administration dwindle, lesser lights take over, more mistakes are made; lather, rinse, repeat”
As Vladimir Putin is threatening to take over ALL of Ukraine and amassing troops and military equipment on Ukraine’s eastern border, along with naval threats on Ukraine’s coastal areas (and then where??) when do the MAGA fans get tired of lather, rinse, repeat?? Do the MAGA folks want to have the legacy of the brownshirts?? Because it’s more than just the ICE goons kidnapping children, imprisoning children, and sexually molesting children who are creating this legacy for themselves. Mitch McConnell–take a bow. Chuck Grassley—take a bow. Lindsey Graham—take a bow. Devin Nunes—take a bow. John Cornyn—take a bow.
What will YOU say 15 years from now when you have to explain the picture with your red MAGA cap?? Good luck with that explanation to your children and grandchildren when they find that photo of you with the MAGA cap.
Moses Herzog
So many good parts here. Best monologue I’ve seen in awhile (of course I miss the David Letterman days). My favorite part is towards the end when he does the Mime routine. There are some semi-vulgar parts here, so, just so people know. I think anyone over age 13 can handle it: https://www.youtube.com/watch?v=FmaXIwzYGDA
Moses Herzog
Menzie, you’re “a man of international mystery and sophistication”. Or so all the German girls tell us. How about a post on the inverted curve for the British gilt?? Come on man, you’re up for this. You can’t fool us with this “I’m the stuffy economics guy” stuff. We know you are the ultimate “wing-man” and we know you have gone bar-hopping with this dude: https://www.youtube.com/watch?v=oP0DaZBmwQI
Moses Herzog: The yield curve is not a statistically reliable predictor of recessions in the UK, as indicated here.
Moses Herzog
I’m semi-embarrassed to say I think I had read that paper, if not all of it, like 75% of it, and had forgotten what it said specifically on UK. Yeah. Someone seemed to be making a semi big deal of it on Bloomberg in the late night hours yesterday, was why it got my attention. But I agree with you and your research. Probably they were looking for some TV show fodder and I took the bait. Thanks for the response.
Can’t wait for the Usual Suspects to note that farm net value added fell during Obama’s 2nd term. Of course it also skyrocketed during Obama’s 1st term.
pgl, well, yes… I’m waiting for your analysis of the reason why agricultural prices spiked… and then declined “before Trump” (aka Obama). Maybe it was the fear of Trump? Or maybe commodity prices are volatile for a number of reasons.
Bruce wakes up in a bad mood,. Hey Bruce – I have NEVER attributed market price changes to which party is in power. That is your game. I attribute changes in prices to things like economics and actual policies. Maybe you will one day grow up and do the same. But doubtful.
BTW – take a course in American history. GEESH!
pgl, I believe you brought up the anomaly; I only asked if you had an explanation. And to the extent that the markets reflect the economy, I believe you have made many comments about the party in power… which seems to have a relationship to “actual policies”. Seems to me I recall a post on this site speculating about a “hidden recession” in ’15-’16.
You can now go back to being an apologist for the Chinese government… or the Irish “social justice miracle.”
My apologizes for the Chinese government? Now you are reading things that are not even there. BTW – I did provide my explanation later. But of course you missed it as it was basic economics.
Obama price decline and rise: Lower global incomes than expected means lower consumption of meat than expected. Meat production is a major source of demand for grains.
My understanding was the quality and prices of cattle feed has a bigger impact on cattle/livestock prices than the other way around.
https://www.agweb.com/article/in-the-cattle-markets-corn-and-feeder-cattle-price-relationship-naa-university-news-release/
https://whnt.com/2018/07/30/tyson-says-tariffs-and-meat-glut-are-eating-into-its-profit/
Maybe we have an agricultural economist out there that can answer that question. People are so happy to blather in the comments section up and until the point you ask them a flat question, then they have nothing to say. What say ye, Masters degree credentialed Ag Economists??? Not one out there??
Census data on U.S. exports of food products from 2008 to 2017:
https://www.census.gov/foreign-trade/statistics/product/enduse/exports/c0000.html
Interestingly, these exports rose from $87.3 billion in 2009 to $135.3 billion by 2014 but slipped after that. Increased foreign demand for U.S. food may have been a factor in its price increasing until around 2014. Less foreign demand following that may have something to do with the price decreases.
Of course we had dollar devaluation for a while but dollar appreciation starting in 2014. And we had basically free trade until 2017.
But hey – why think in terms of economics when the Usual Suspects just do D versus R!
Off-topic
Maybe most people here have already read this. If you haven’t, it qualifies as MUST reading:
https://www.washingtonpost.com/outlook/2018/12/12/trump-made-competence-dirty-word-now-he-has-settle-second-rate-talent/?utm_term=.fe211f34f447
The highlight of this discussion of donald trump:
“His inability to recruit, or to even to listen to, top people has hampered everything from Trump’s foreign policy to his own legal defense. His hostility to sound advice, coupled with reliance on his frequently terrible instincts, has produced a kind of synergy (to use a newly infamous word) of incompetence in the White House and beyond: Things go wrong on the world stage, Capitol Hill or with the media. Trump never blames himself, instead blaming everyone else, including the people who work for him. Experts — also known as people who know what they’re doing — have had two years to observe this and have understandably become less willing to work for him. Their numbers inside the administration dwindle, lesser lights take over, more mistakes are made; lather, rinse, repeat”
As Vladimir Putin is threatening to take over ALL of Ukraine and amassing troops and military equipment on Ukraine’s eastern border, along with naval threats on Ukraine’s coastal areas (and then where??) when do the MAGA fans get tired of lather, rinse, repeat?? Do the MAGA folks want to have the legacy of the brownshirts?? Because it’s more than just the ICE goons kidnapping children, imprisoning children, and sexually molesting children who are creating this legacy for themselves. Mitch McConnell–take a bow. Chuck Grassley—take a bow. Lindsey Graham—take a bow. Devin Nunes—take a bow. John Cornyn—take a bow.
What will YOU say 15 years from now when you have to explain the picture with your red MAGA cap?? Good luck with that explanation to your children and grandchildren when they find that photo of you with the MAGA cap.
So many good parts here. Best monologue I’ve seen in awhile (of course I miss the David Letterman days). My favorite part is towards the end when he does the Mime routine. There are some semi-vulgar parts here, so, just so people know. I think anyone over age 13 can handle it:
https://www.youtube.com/watch?v=FmaXIwzYGDA
Menzie, you’re “a man of international mystery and sophistication”. Or so all the German girls tell us. How about a post on the inverted curve for the British gilt?? Come on man, you’re up for this. You can’t fool us with this “I’m the stuffy economics guy” stuff. We know you are the ultimate “wing-man” and we know you have gone bar-hopping with this dude:
https://www.youtube.com/watch?v=oP0DaZBmwQI
Moses Herzog: The yield curve is not a statistically reliable predictor of recessions in the UK, as indicated here.
I’m semi-embarrassed to say I think I had read that paper, if not all of it, like 75% of it, and had forgotten what it said specifically on UK. Yeah. Someone seemed to be making a semi big deal of it on Bloomberg in the late night hours yesterday, was why it got my attention. But I agree with you and your research. Probably they were looking for some TV show fodder and I took the bait. Thanks for the response.