Kauffman on ag industry: “It’s a ground-up effort”

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Jones National Bank and Trust Co. hosted a speaker who discussed the agricultural economy.

On Jan. 19, Nathan Kauffman, assistant vice president and Omaha branch executive of the Omaha branch of the Federal Reserve Bank of Kansas City, spoke to a full room in the Jones Bank auditorium.

Kauffman has a doctorate in economics from Iowa State University and is the lead agricultural economics expert at the Kansas City Fed, according to the Fed’s website. It states he leads efforts to track the ag economy.

Kauffman said he often speaks to those in the ag industry to help track its economy.

“It’s a ground-up effort,” Kauffman said.

He said along with meeting people, as an economist, he uses data analysis to find out what issues trouble people so they can plan ahead.

When it comes to the ag economy, there are significant events people usually use as markers.

“I often think about it in time periods,” Kauffman said.

The 1980s are one of those chronological landmarks, but more recently, Kauffman said 2008-2009 was a difficult time for farmers.

During that time, he said Americans had to deal with the great recession, but things were different for ag and ag-related communities.

“Ag was actually supporting this region,” Kauffman said, later adding that Nebraska has a large ag economy. “You can’t really disentangle where the farm stops and the rest of the industry begins.”

Before the recession, Kauffman said in 2006, there was a period of change and growth, Kauffman said. Energy markets came on the scene and China also became an emerging market. This included building the biofuel market.

Kauffman said this created sustained growth that mostly insulated Nebraska from the housing market crash.

However, Kauffman said there was a different commodity environment around 2013.

Commodity prices, like corn and soybeans, were high until 2013, when they began to drop. Since then, Kauffman said the ag economy has been coasting along.

“We have been in this area of transition,” Kauffman said.

He said there’s a sense of caution, but long term, things are still looking positive.

“There’s still a lot of optimism,” Kauffman said.

He said the emerging markets in 2006 are still relevant, the issue is that growth, for both China and biofuels, is not the same.

Kauffman said supply had caught up with the demand.

Since 2013, there have been four or five years of good products and advances in technology that help mitigate price pressure from the suppressed commodity prices.

But Kauffman would not characterize today’s market as similar to the 1980’s, when interest rates were much higher.

Another difference, Kauffman said, is that there is still a demand for ag. In the 1970s, Kauffman said there was a drop in global demand.

Kauffman also said that even though the ag economy is faring better than the 1980s, there are still some producers facing challenges.

One of those challenges is that farm real estate prices have faced a gradual five to eight percent decline over the last few years, which can affect farmers’ assets and how they secure financing if the farmer needs to use land as collateral.

“2016 could’ve been worse,” Kauffman said.

Kauffman said there will be challenges in 2017, especially for cattle producers.but there is optimism for soybeans.

“There’s some uncertainty, but that’s always out there,” Kauffman said.