Government Payments, Strength Of Dollar, Will Have Direct Impact On Health Of Washington Farm Economy

Predicting the health of the Washington farm economy in 2022 looks to be more challenging than a typical year. Washington State University’s Dr. Randy Fortenbery said one of the most notable changes will come in the form of an elimination of government subsidies and payments. These, he noted, were critical to the strength of the Washington farm economy over the past couple of years to help offset the damage done by the trade war as well as the pandemic. Going forward, sees a return to the importance of traditional crop insurance, ARC and PLC.

“So, as we go forward into 2022-2023 I suspect we’re going to see an elimination of the pandemic type payments, we’ll see an elimination of the market facilitation payments, those payments that were compensating for trade restrictions, and really the last couple of years those have been the larger percentage of total payments taken by producers as total government payments.”

While the impact from the elimination of government payments is relatively easy to predict, international issues are not that simple. Fortenbery said most food products produced in Washington are export sensitive. And if the U.S. dollar gets stronger and more expensive, American products become less attractive overseas. He said the fed raising interest rates potentially five or six times this year could have a big impact on health of the Northwest farm.

“If it turns out that dollar denominated assets are considered to be safer to hold than other assets, and there’s a rush to convert other currencies into U.S. dollars so the dollar based assets can be held, either as a hedge against the Russian-Ukrainian conflict, or because of the attractiveness higher interest rates in the U.S. as interest rates go up, that could have a big impact on how much we export from the apple sector, the dairy sector, the forage sector or the beef sector, for example.”

Speaking of international issues, how does Fortenbery see Russia/Ukraine, or China impacting the Washington farm economy?

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