“How commodity markets go is how Oklahoma goes,” says Cortney Cowley, an economist in the Regional Affairs Department of the Federal Reserve Bank of Kansas City, Omaha Branch.
“A lot of what we are seeing both in the U.S. and Oklahoma, more regionally, is moderate growth,” said Cowley, a keynote speaker at the Rural Economic Outlook Conference at Stillwater, Okla., Oct. 20. “Digging down more into some of the economic indicators, if we look at measures of gross domestic product (GDP), unemployment, employment growth and personal income, we’ve seen some weakness in 2015 and 2016 in Oklahoma but a lot of that has stabilized coming into 2017.”
While, frailty in oil, natural gas and agricultural commodities contributed to much of the weakness in 2015 and 2016, cattle, oil and natural gas have rebounded in 2017. “We are still seeing a lot of weakness in the crop sector,” Cowley says, “but other areas of improvement have contributed to stabilizing the Oklahoma economy.”
Oklahoma is one of seven states (Colorado, Kansas, Nebraska, Wyoming and portions of western Missouri and northern New Mexico) included in the 10th District of the Federal Reserve, which is served by the Federal Reserve Bank of Kansas City. Cowley says, of the 12 Federal Reserve districts, the 10th is the most concentrated in agriculture.
On a national level, the U.S. agricultural sector is still in another year of downturn, though the severity of those declines is not as extreme as in previous years. “We’re still seeing lower farm income, lower repayment rates in ag finance and higher demands for loans,” notes Cowley, who says her economic perspective comes from Federal Reserve surveys completed by agricultural lenders and what they are saying in terms of measures the federal reserve collects, like farm income and credit conditions.
“In 2017, we’ve seen improvement in cattle, dairy (which may not be big in our district), but still improvement in the livestock sector, that have contributed to improvements on the whole,” says Cowley. Within the 10th District, 50 percent of all agricultural commodity sales are from the livestock sector. “So whenever we see improvements in that sector, we see some stabilizing in agriculture as a whole, even though we are still seeing quite a bit of weakness in the crop sector throughout the state.”
With another year of downturn looming for producers, Cowley compares agriculture to monetary policy--working on long cycles. She encourages growers to not give up and to work closely with their bankers. “We work with a lot of bankers at the fed and they are very willing to work with producers. A lot of bankers lived through the 1980s and are able to create creative strategies.”
Cowley also recommends that growers know where their breakeven is. “If you know what your costs are and what price you need when you see it, that’s a good time to sell,” she says. “Stock-to-use ratios continue to increase. There’s no indication that production this year is not going to be historically high, so we’re still going to have a lot of stocks, inventories weighing on prices. So, if there’s an opportunity to sell and you know where that is, that’s one of the more important things moving forward for agricultural producers.”
For more information or to create a financial strategy, Cowley says producers can contact their community banks and the farm credit districts throughout the U.S. “University Extension is an excellent source of information for producers, so the land grant university in your state is a very good resource, whether it be enterprise budget analysis, trackers or tools that you can use where you just input your information.”
With a new farm bill coming in 2018, Cowley says, university Extension will have farm bill tools where growers can figure the program in which they want to enroll. “And then at the Kansas City Fed, we focus on the agricultural economy in the Omaha Branch, so anyone interested in what’s going on in terms of ag finance and ag banking, we have a lot of resources on our website as well.”