While speaking at the SLV Potato Business Summit on Monday in Monte Vista, Crystal Carpenter, senior economist with CoBank, told attendees that they were in a rough phase and chances are the scenario will just turn worse before getting better.
Carpenter said that 2019 is expected to witness a decent business cycle, but not as robust as 2018, due to presence of myriad things on horizon, many risk factors that could drag them in to a recession.
She mentioned that the United States has more open jobs as compared to unemployment in the labor market, for the first time since 2000. She said that a lot of people are working on the market now. She explained that the task of seeking agricultural job works is quite daunting, as many crops are labor intensive, and agriculture has been seeing hard time as compared to other industries for workers. She added that agriculture sector is required to pay more to get labor.
She said that Colorado has a higher wage rate growth as compared to the United States, 3.2% versus .09% nationally. A shortfall in truck driver continue to remain a prime restraint. She mentioned some factors that agriculture industry players must consider, including rising federal interest rates; China trade war; Brexit repercussion on the UK; economic befall in Germany and Italy; the rising U.S. dollar value; and trade tariffs. The rise in the dollar will make exports highly expensive. The US agriculture economy has witnessed slow margins in the recent years, and such a trend isn’t likely to change anytime soon.
She added that cropland values continue to remain quite stable in Colorado, unlike the Corn Belt.
Carpenter mentioned that the potato market isn’t witnessing the same decline in exports like some other commodities as potato growers don’t rely on exports. Restaurants continue to remain a key driver behind the demand for frozen potatoes. Owing to the increasing fast food consumption, the demand for frozen potatoes will continue to rise, fueling growth in frozen potato market. Expansion of instant service restaurants is also driving the demand for frozen potato.
In 2018 through October, potato exports didn’t witness a similar fall in exports as others did. She added that potato growers are looking forward to expand their markets to other countries, including Japan, China, and Mexico and Japan, but could face obstacles like increased tariffs in Mexico.
Sneha Varghese is an experienced food & beverage consultant. She covers the latest trends and analysis impacting the food & beverages industry, informing and educating audiences through her writing.