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Economist paints a better ag year, but income may be less

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Blake Brown sees contracted pounds of U.S. flue-cured tobacco returning to over 300 million pounds due to China’s return to U.S. tobacco and increasing purchases from other countries as well
Blake Brown expects stronger commodity markets this year but notes USDA does forecast a decrease in farm income primarily due to lower government payments.

North Carolina State University Extension economist Blake Brown sees a better year for agriculture in 2021, particularly for North Carolina agriculture.

Brown delivered his economic outlook as part of North Carolina Agriculture Commissioner Steve Troxler’s virtual State of North Carolina Agriculture address Feb. 24. Brown expects stronger commodity markets this year but said USDA  forecasts a decrease in farm income primarily due to lower government payments.

While U.S. farm income is expected to be down in 2021, Brown expects North Carolina farm income to be up thanks to improvements in pork, poultry and tobacco prices. Pork and poultry were hit hard in 2020 by the pandemic while tobacco was slammed due to the trade war with China. Brown sees improvements for pork and poultry as pandemic restrictions ease and a better year for tobacco as China returns to the market.

In addition to more trade with China, Brown also sees market opportunities for other Southeast Asia countries. Growth in global meat consumption, especially in southeast Asia will benefit hog and poultry producers. Still, China will drive the market in 2021. Brown said a key factor in trade with China is alarms on both sides of the aisle of China as a national security threat. 

“The  rhetoric will change in terms of dealing with China, but the policy and the approach will be fairly similar. This is going to strain our relations going forward and while there will continue to be very strong export opportunities for agriculture, it will be clouded by this national security issue,” Brown said.

The return of China purchasing U.S. tobacco is welcomed news for North Carolina flue-cured tobacco farmers. Brown sees contracted pounds of flue-cured tobacco returning to over 300 million pounds in 2021 due to China’s return and increasing purchases from other countries as well.

Another factor impacting U.S. tobacco, sweet potatoes, and peanuts in late 2020 and early 2021 was the 25% tariff by the European Union on those commodities brought on by the long running dispute between the EU and U.S. over airline subsidies. Brown says the dispute has nothing to do with agriculture, and he expects it will be resolved before the end of the year, particularly when Biden administration trade officials are in place.

“I don’t know about the overall dispute, but the EU ambassador to the U.S. has proposed that they suspend the 25% tariffs for six months so that they can try to renegotiate this deal or negotiate an end to this dispute. Hopefully, this will come off a little later this year. It’s been problematic because it’s introduced a barrier in the short run, and it’s caused exporters to try to figure out how they are going to deal with this, and it’s caused buyers in the EU to figure do they wait for this tariff to be removed,” Brown said.

In the meantime, Brown emphasized that climate change will be the new theme for farm programs. He said everybody is talking about carbon sequestration, and it is critical for farmers and farm groups to be engaged  in the process so they can receive incentive payments rather than being regulated.

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Blake Brown says climate change  will drive farm programs.

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