Cattle Uptick
Livestock showed some profit opportunity in 2017.

As each new year begins, hopes are up in spite of the realities of the previous year

Production costs went up in 2017 after two years of decline, leaving overall ag sector income compared to 2016 "pretty flat," putting many farmers further in debt than in 2016.

As each new year begins, we are generally encouraged to look at opportunities that could make our future look brighter. Harvard University's David Ropeik summed it up in a recent article in Psychology Today, "Our celebration of what's ahead is rooted in our most ancient instincts," namely, hope that the new year will bring the good tidings that perhaps were elusive over the past year.

In that article, Ropeik suggests that when the clock strikes midnight on Dec. 31 most of us will quietly hope that the new year will be significantly different than the year before, a time of change that will bring more prosperity and greater success and happiness.

"This unique tick of the clock has always prompted us both to celebrate and to step outside the day-to-day activity we’re always so busy with—to reflect, to look back, take stock, assess how we did, and resolve to do better going forward. Save perhaps for our birthdays, no other moment in the year gets this sort of attention," he writes.

But in the world of agricultural production, it's difficult to look ahead without taking a hard look at what transpired in the year we just completed. In other words, it's easier to have hope for the new year when last year's successes outweigh the year's setbacks and failures. But considering 2017 was fraught with challenges, many of them representing tough and even unexpected developments, hope for the new year may not be high for many farmers and ranchers, though many have seen tougher years in the past.

Hard Times

For example, there were lean times starting in 2011 when a historic drought caused many to suffer significant losses in production and farm income. There was, of course, the Dust Bowl years and other tough times many will remember for a long time to come.

But in spite of challenges of the past year, 2017 ends with a few small gains, hopefully enough to offer hope for the year ahead.

USDA's chief economist Rob Johansson chimed in last week with a look at some of the realities of 2017, and offered insight in how the new year might fare. According to his analysis, if you are hoping for significant improvement in 2018, you might have to wait a little longer.

"I think 2017 will most likely be remembered as another year in this downturn of commodity prices. If there is a silver lining, it has been with respect to animal production," Johansson said.

Livestock Upturn

He said most livestock producers enjoyed an upturn in their receipts, up about 7.5 percent, but farmers suffered continued to see erosion on the crop side of things.

"Crop yields were a little better for the year, but returns on planted acres may have been at or below expected costs for those acres," he added.

Production costs went up in 2017 after two years of decline, leaving overall ag sector income compared to 2016 "pretty flat," putting many farmers further in debt than in 2016.

Perhaps more importantly, net farm income outlook for 2017 offers little encouragement for the year to come.

"Net cash farm income for 2017, about $97 billion, was up almost 4 percent relative to 2016, a good estimate," he said. "But of course those numbers are subject to change once we get better end of year data in. Net farm income, which includes additional measures of profitability on the farm, including building and inventory changes, is currently forecast at $63.2 billion, up 2.7 percent, so relatively flat compared to 2016."    

Perhaps worse for many farmers in Texas, Florida and other parts of the Southeast and in the Western states, what may have been a push for farmers in terms of farm income in many states was more disastrous for others on the heels of a year filled with multiple major disasters.

Major Disasters

Those that suffered heavy damages and losses from Hurricanes Harvey, Irma and Maria, and from out-of-control wildfires that are still troublesome for West Coast agriculture, 2017 ends with a big question mark at best, and at worst with heavy physical and financial losses that must be overcome.

While analysts say a possible third round of disaster aid being considered by Congress as the year ended could help some producers, rebuilding after widespread devastation and reductions in inventory will represent a challenge that may require more than one production year to overcome.

The problem intensifies for smaller, independent farmers and livestock producers who may not have access to the financial resources to weather the storm.

If there is a bright side for agriculture to the end of the old and the welcoming of the new year, chances are it would need to come from a positive outcome of trade negotiations that improve, or at least leave intact, open trade with trading partners Canada and Mexico, and additional relief from areas including an ease of federal regulation and a new and stronger farm bill that addresses agriculture’s growing need for a positive safety net.

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