Quarterly US Rural Economic Review: Trade Resolutions Boost Optimism for a New Year

Key Points

• A busy December in Washington has yielded progress or resolution on many issues: the U.S.-China “phase one” deal, USMCA, ag labor reform, and a federal spending bill. These will benefit the U.S. economy and agriculture more than most industries.
• The world’s central banks have been doing battle with a slowing global economy by reducing interest rates. Those efforts should create a soft landing in Q1 2020.
• The U.S. economy will enter 2020 on firm footing. But cost cutting by corporations is expected to drag on the labor market and consumer spending as the year goes on.
• A challenging fall harvest in the heartland and slow grain exports will give way to increased plantings for corn and soybeans in 2020. Optimism over the phase one China deal should benefit producers, input suppliers, and exporters alike.
• The animal protein sector stands to benefit from the phase one China deal and the persistence of African Swine Fever across many parts of Asia and eastern Europe. Exports will continue to climb as market conditions remain positive.
• Milk prices should remain above year-ago levels in 2020, providing some relief to a hard-hit industry.
• The FCC is requiring telecom operators to rip and replace equipment from manufacturers named on the national security threat list. This will keep operators in a holding pattern, loath to incur costs for network support and maintenance.
• Persistent weakness in natural gas prices contributed to the closing of nine coal-fired generating plants in Q4 2019. Natural gas prices are forecast to rise in 2020.

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