Two views: Things are great, or we’re on the verge of catastrophe
We planned to do an economic outlook today and set out to review some expert advice, read the news through a different lens and generally offer an overview of what we’re seeing. But there’s so much that’s not really concrete right now. There are too many variables that are unsettled so instead, we’re going to discuss those and what we like/concerns us about what we are seeing.
In general, the United States economy is in a good place. Unemployment is at near record lows and the number of available jobs continues to grow at a pace similar to previous months. Yet, there are growing signs causing many to wonder if the good news about the economy will continue. The deficit continues to grow, and the gross domestic product is expected to be lower in 2019 than previous years. As we finish with tax season, consumers in states with high income taxes appear to be hit rather hard by the changes in the federal law that reduced the amount of state tax they could deduct. Even though the economy appears healthy, consumers are carrying high levels of consumer debt, indicating things are tight. People aren’t able to pay off high-interest loans like credit cards, and a record 7 million Americans are in danger of having their cars repossessed. Car payments are generally one of the last areas to default, since so many need their cars to get to work.
Food sector jobs continue their upward trend at the same average rate of gain over the previous 12 months.
The Southern Border
It was just last week the President was, again, threatening to close the border. This causes extreme concern in the food industry for a variety of reasons. News coverage about closing the border likely increased awareness among Americans about exactly how much Mexico and America rely on each other. Chris Wilson, deputy director at The Wilson Center’s Mexico office said, “There’s about a billion dollars of commerce that crosses the border every single day, so every day it’s closed we’re losing out on hundreds of millions of dollars.” The US Farm Bureau market analysis team did a deep dive into the effects of the proposed closure.
Likely the biggest issue for farmers surrounding the crisis on the border centers around the availability of farm laborers. For years, agriculture has relied on a steady supply of migrant workers to help with farm work. The lack of workers could mean crops are not planted, cared for or even harvested. Not only are workers unable to cross the borders, those working fear the Immigration and Customs Enforcement raids that are in the news periodically. US Farm Bureau president Zippy Duvall expressed relief when the President backed off on closure threats, saying it “is good news for farmers and ranchers on two fronts – trade and access to agricultural workers. Our farm and ranch families continue to face an economic storm that would have become even more severe had the border been closed. Our ability to secure workers through the H-2A program is essential to many of our farmers and growers.”
And then there was the very real concern for the food industry that if the border closed it would be just two weeks before there would be a severe shortage of avocados. Might it have brought the end to avocado toast?
Truck Driver Shortage
The labor shortage surrounding the availability of unskilled workers is only one aspect of how a scarcity of labor is affecting the food industry. For several years now, the trucking industry has reported a shortage of qualified drivers, and it’s just getting worse. This is a serious problem for the food industry since so much of the industry’s production travels in trucks. While the trucking industry has been reporting a shortage for some time and concerned younger workers don’t want to be long haul truck drivers, the problem is only recently coming to the attention of end users. That’s because current distribution agreements now include recently negotiated salaries and costs, resulting in a sharp jump in cost of goods. Restaurants, retailers and others are trying to figure out how to pass these costs on to consumers without increasing prices drastically. But it’s going to happen, and consumers will not be happy about it.
When there are weather events (floods, fires, etc.) in distant parts of the country, or worlds from where you live it can be hard to be concerned. But Americans need to prepare for the effects of last summer’s forest fires and this winter’s Midwest flooding because they will affect the food chain. The damage in the Midwest is estimated to be over $3 billion in loss of homes and farms, including a wide range of food products.
There’s good news on the water front in some western states as reservoirs are full but other areas continue to experience drought. At the same time, water temperatures are increasing in fishing communities, and temperatures are rising everywhere. Each will have an impact on the price of food as the economics of growing and harvesting a crop don’t change and farmers can only shoulder part of the burden.
The work the Administration is doing to balance the trade deficit is not in the news as frequently as the crisis at the Southern border, but it’s still critically important to the food industry. There’s concern around the uncertainly of the deals the President has been making, and is still negotiating, with several countries. Crops like soybeans are affected by the tariff deals as well as by the Midwest flooding. These farms can’t afford the double punch, but we all need the farmers to put food on the table. Industries, like the Alaska seafood industry, are learning the importance of diversification as reliable markets become less so as the uncertainty of tariffs continue.
All in all, we hope the situation remains sunny as we approach the summer growing season in the United States. We are happy to see such wonderful new product innovations in the pipeline and hopeful government regulations protect our farmers and food supply for years to come.
This post first appeared on food-pr.com
Storm image by Clark Young on Unsplash