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OEDIT Offers Colorado Ag-Business Summary

 

According to the Bureau of Economic Analysis, BEA, agriculture contributed about $2.5 billion to the Colorado economy in 2015. In 2016, this contribution had declined to about $2.1 billion, a decrease of approximately 15.3%. Colorado growers have been struggling in 2017 due to suppressed commodity prices.  

Both wheat and corn prices are below their five-year averages, while beef prices are almost unchanged from their five-year average. As of late June 2017, corn prices declined 47.3% compared to their respective value five years ago and dropped 6.8% year-over-year. Corn prices have remained steady, ranging from $3.43 to $3.83 a bushel in 2017 as prices remain near their long-term average. Wheat prices have declined 39.6% from their value five years ago but have been improving in 2017, posting a 12.6% year-over-year gain.  

Beef prices have been volatile in the past five years. Some farmers and ranchers are operating in an environment where revenues do not exceed the cost of production.

These suppressed commodity prices are contributing to increased financial stress for many farmers and ranchers. Agricultural lenders are reporting an increase in the number of underperforming loans and an associated slowdown in economic activity in rural communities tied heavily to agriculture.  

In order to deal with the psychological stress farmers are experiencing, a hotline is being set up in Colorado. 

Growers also remain concerned about the political atmosphere as of late June 2017. The rejection of the proposed Trans-Pacific Partnership (TPP) trade agreement by the Trump administration was a setback for the agricultural sector. The import tariff on U.S. beef entering Japan would have been lowered from around 38.5% to 9%, which would have led to an increase in demand for Colorado beef (one of the state’s top exports).  

The North American Free Trade Agreement (NAFTA) has been a major talking point of the Trump administration. NAFTA removed and reduced many tariffs imposed on U.S. agricultural imports to the point where many agricultural goods are exported to both Canada and Mexico duty free. Actions leading to a reduction or withdrawal from NAFTA could hurt U.S. farmers. Any increase or implementation of foreign import tariffs would reduce demand for U.S. and Colorado agricultural exports. The administration appears to favor the Transatlantic Trade and Investment Partnership (TTIP), which would reduce trade barriers between the United States and the European Union. This agreement is expected to benefit numerous domestic industries, including the dairy industry. The U.S. dairy producers would be granted access to European markets similar to the access that Canadian producers currently enjoy. Negotiations ended after the proposed deal faced public backlash in 2016. However, numerous government leaders have indicated as of late June 2017 that they would be willing to reopen negotiations on the proposed trade agreement. 

Other U.S. export factors have also been affecting Colorado growers. The U.S. dollar has a strong value relative to other currencies, which makes U.S. agricultural goods cost more for foreign consumers relative to other countries’ agricultural goods. One bright spot is the new agreement by China to resume imports of U.S. beef that had been banned since 2003. 

Drought conditions have diminished throughout the state, leading to good growing conditions and opportunities for Colorado farmers. As of July 19, 2017, the U.S. Drought Monitor reported that 66.8% of Colorado was experiencing no drought conditions, while 33.2% of the state was suffering from abnormally dry conditions. No area of the state is currently experiencing conditions that are described as a drought. 

Growers have also been adding new agricultural products to their portfolios, including quinoa; melons of a small, “personal” size; and industrial hemp. Many growers are taking advantage of the healthy food trend in the state, with its epicenter in the Boulder area. Among these trends are locally grown produce and locally raised livestock. 

In 2016, Colorado had 312 registered hemp growers who grew at 424 separate locations. In total, about 6,000 acres and 1.36 million square feet of indoor production was devoted to hemp cultivation. More space is devoted to hemp production in Colorado than is devoted to the production of cantaloupe (600 acres), grapes (800 acres), peaches (2,600 acres), and sweet corn (3,500 acres). Colorado accounts for about half of the industrial hemp production in the nation and ranks as the number one state for hemp production in the nation. While traditional commodities struggle, new opportunities are emerging with the rise of the healthy foods trend and hemp production.

 

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