Tag: U.S. economy

The Weather, The Economy and Economic Espionage

By Mitch Lies

Photos by Mallory Phelan

andres bergero bank of the westHigh consumer confidence supported by high home values and cheap oil provide an opportune time for agribusinesses to expand, according to a Bank of the West vice president to speak at Oregon Aglink’s annual meeting, Jan. 21 in Woodburn.

Andres Bergero, vice president and foreign exchange sales manager of Bank of the West’s Capital Markets Division, added that he expects the elements favoring expansion to remain in place for at least the next two years.

“These are the times to think about expansion, because right now, you can ride that wave of consumer confidence,” Bergero said. “You can expand because you’ll know the consumers will be there.

myron miles annual meeting“With oil prices down, American consumers are spending more, and that it not going to stop,” he said. “This parade has two to three years to go before it changes. That is how long a major change in the economy would take to deflect the consumer direction.

“The U.S. is poised to have a really good year in 2016 and 2017, as well,” he said.

Bergero’s presentation was part of a slate that included a look at how El Nino is influencing weather and insights into economic espionage.

In addition to propping up consumer confidence, Bergero said low oil prices also are lowering transportation costs for farmers, providing another good opportunity for farm expansion.

Bergero added that with Iran coming into the market, with Saudi Arabia maintaining production levels and with declining demand, he believes oil prices will stay low.

“Your cost, your margins for delivering and receiving goods are as low as they’ve been in a long, long time,” he said. “It’s time to think about what else can you do? What more can you do? What more markets can you reach?”

One element hampering economic prosperity in the farm sector is the strong U.S. dollar, Bergero said. Coupled with high unemployment in much of Europe, a relatively weak Chinese yuan and a volatile Chinese stock market, exporters “are not in the driver’s seat,” Bergero said.

Bergero added that the economic situation in China may trend lower, and that further Bank of China monitory actions may occur, including further rate cuts and even additional Yuan devaluations.molly mccarger annual meeting

“They are struggling,” he said, “and that chaos and lack of confidence in the market will continue to erode.

“I think the situation is much dire than they are predicting, and the yuan will continue to go down,” he said. “In fact, China is talking about another 5 to 10 percent devaluation of their currency.”

In Europe, Spain is experienced an unemployment rate of 25 percent, he said, and that’s not counting young adults from the age of 19 to 26. “Add that, and unemployment is closer to 40 percent,” he said, “and it is not that much different in Portugal.

“The only good light in the Eurozone is Germany,” he said. “They continue to export and to build.”

Bergero closed his presentation by advising participants to “look for low-hanging fruit to help fix whatever short-comings you may have. You should think about what can I do differently now, knowing that the consumers will be there in the next 12 to 24 months, knowing that interest rates will be low, knowing that oil will be low and knowing that the dollar is strong,” he said.

IMGJon Sorenson, a special agent with the FBI in Portland, followed Bergero’s presentation with tips for farm businesses to avoid economic espionage.

“You might think you won’t be targeted,” Sorenson said, “but you should realize you are a target.”

Intellectual property theft can result in lost revenue, lost jobs and damaged reputations, Sorenson said.

Among best practices Sorenson shared with meeting participants was to recognize your business’ vulnerability and to fix those risks.

“Make sure you have virus-scanning software,” Sorenson said. “Make sure you have firewalls. Make sure you destroy or wipe out any information on a hard drive before giving it back to a vendor or donating it.”

He advised businesses to conduct annual training to educate employees about risks.

“Have periodic training to remind employees of security threats that are out there,” Sorenson said. “And establish a reporting program, so that if someone has a suspicious contact or they click on an email and are afraid they got a virus on their computer, they have a path they can take to report it.”

When traveling to a foreign country, Sorenson advised participants to be careful about leaving items in hotel rooms that contain sensitive information.

“I have heard stories where people have left computers in their rooms, and people have accessed their computers by entering their rooms,” he said. “When traveling, make sure you keep computers and cellphones with you.”

When hosting a tour group, be aware that surreptitious individuals can access offices, plug a thumb drive into a computer, and download sensitive information.

Sorenson urged participants to call the FBI with any problems or questions.

“So many countries like to cut corners and steal what we have manufactured just to keep up with us,” he said. “Our job with the FBI is to try to help producers – whether it is ranchers, businesses, farmers – stop that economic espionage from happening.

“If you have problems or questions, please don’t hesitate to call the FBI and we’ll work with you to try to figure the whole situation out,” he said.

Sorenson was followed by Andy Bryant, a hydrologist with the National Oceanic and Atmospheric Administration in Portland.andy bryant NOAA hydrologist

Bryant said that as of mid-January, snowpack in most of Oregon was about 10 percent higher than average, and in some areas, 80 percent higher.

That is in stark contrast to last year, when snowpack was at record low levels in much of Oregon, primarily due to high temperatures.

“Starting in December and January of last winter, all the way through the summer, we had very high temperatures,” Bryant said. “Typically, we were four to ten degrees above average on a monthly basis for much of the state.”

Between June 1 and Aug. 31 of last year, Bryant said the city of Portland broke the previous record for average daily high temperature by more than two degrees.

“Typically, when we break a record like that over the course of two or three months, we maybe break it by a tenth or two of a degree,” he said. “So it was a very significant period of hot weather.”

Bryant said to expect precipitation to slow in the spring, given that Oregon typically experiences warmer and drier than average spring conditions during El Nino.

“I know we’ve been wet, but we’ll see what things look like once we go all the way through March and April,” Bryant said.

“We’re not expecting a lot of precipitation, based on previous El Ninos,” he said.

He added that the outlook is for above-average temperatures continuing into the summer months.

“What we had last summer was really extreme, so we’re not expecting a repeat of that, but the overall trend is for above-average temperatures,” he said.

As for the water-supply forecast, he said to expect ample supplies in much of the state. The Willamette River at Salem, for example, is looking at about 90 percent of average, he said. “That is slightly below average, but for our needs here in the Willamette Valley, it would be plenty of water.”

Looking further out, Bryant said that forecasters are expecting a La Nina event to take place next year, which typically brings cooler and wetter temperatures in the Pacific Northwest.

 

Doing More With Less: The Future of Oregon Ag

By Heather Burson

Oregon’s economy, Mexico’s declining farm labor supply and issues at the port all have significant bearing on the future of Oregon agriculture. These issues were the focus at the Agri-Business Council of Oregon’s annual meeting January 22 at the Silverton Wellsprings Conference Center in Woodburn. Three speakers were invited to present their findings, Andres Bergero, VP of Global Trade & FX Solutions at Bank of the West, Diane Charlton, researcher at UC Davis, and Curtis Robinhold, Deputy Executive Director for Port of Portland. Together, they touched on what Oregon agriculture must do to continue to thrive now and into the future.

Their main prognosis calls for several adjustments based on a variety of factors at hand. The current and future state of the U.S. economy being one of them. Bergero shared that overall, the year ahead looks promising. Our unemployment rate is decreasing, consumer debt is lower, the housing market is starting to come back and consumers are getting a boost from lower oil prices. “Consumers have more money to spend, so you can expand what you do,” says Bergero. All of these factors bode well, but the current economic climate is not without its challenges.

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One effect producers will have to contend with is a higher GDP. According to Bergero, this puts importers “in the driver seat,” but leaves exporters scrambling to find techniques to overcome a strong dollar and stay competitive. While importers can expect more from a strong dollar than they could in years past, especially if they’re invoiced in that country’s currency, exporter’s products don’t look as attractive with a strong dollar. Bergero advises reducing costs, considering different terms, and renegotiating. All things that will need to be considered as available labor continues to decline.

Job trends show that labor will continue to be a huge factor and will require an intensified response. Bergero shared a U.S. Bureau of Labor Statistics graph showing waged agriculture will remain flat while self-employed agriculture continues to decrease. A large part of this trend can be attributed to U.S. agriculture’s dependence on an imported labor force. Charlton and her colleagues analyzed 30 years of data that points to this very conclusion and the need for a change.

“In the 1950’s the farm labor force in the U.S. declined rapidly, and the measure they took in the 50s and 60s was to import (labor) from Mexico,” says Charlton.

OLYMPUS DIGITAL CAMERAToday, research shows that only two percent of California’s agricultural workforce comes from the U.S. This means the remaining 98 percent is made up of workers from a variety of other countries, predominately Mexico. A fact that presents an alarming situation. According to Charlton’s research, Mexico’s agricultural labor supply is in decline and several trends are responsible. The country itself is plagued by a falling birthrate, an increase in non-ag GDP, more secondary schools, and an increase in border control. With demand for farm labor in Mexico growing, Mexico finds itself in a transition stage, simultaneously exporting and importing farm labor. “Mexico is importing workers from Guatemala at the same time they are exporting workers to the U.S.,” Charlton says. Thus, the U.S. and Mexico are competing for a dwindling supply of available farm labor.

One solution would be to import agricultural workers from other countries not as far along in transition. Yet, Charlton points out that those other countries may reach transition and then we’d find ourselves with the same problem. She notes a few other viable solutions instead, changing cropping patterns, growing less labor-intensive crops, and adapting ag education. The ultimate solution will require a combination of all three.

Changing cropping patterns to grow less labor-intensive crops goes hand-in-hand with increasing the mechanization of agriculture. Both could help fill the void left by a declining agricultural labor supply. Another practice Charlton recommends to help ag do more with less is changing ag education, “looking at different skill sets that we can bring into this industry to help it grow.” Bergero’s presentation points to job sectors that are on the rise, and one of those is technology. Bringing skill sets from these kinds of industries into the mix could be a huge asset to agriculture and its prosperity in years to come. “If we can match those skills to the work, perhaps make them more technical, match them with technologies to make those workers more productive, that can really keep more people in the sector,” says Charlton.

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These recommendations could be what maintains international trade through West Coast ports, now facing issues and shortages of their own in the wake of recent labor strife. Most notably, the loss of Hanjin. “The loss of container service from Hanjin will reduce one of the lower cost avenues for Oregon agricultural producers to get their products to international markets,” says Robinhold. For some Oregon producers, an increase in costs will become the new norm. “They will still be able to export and import, but by container it could require shipping through Seattle, Tacoma, San Francisco and Oakland, and that increases costs to farmers and producers,” Robinhold says. Methods that require less labor and add different skill sets, like those suggested by Charlton, could help make shipping through other ports more affordable. These are the kinds of tools we need to consider as we move forward.

Although challenges like these lie ahead, Oregon agriculture will continue to persevere as it has always done. Making adjustments is just part of the process. Strong dollar or weak dollar, Oregon’s importers and exporters have the tools to weather the storm and stay profitable. Adapting labor and adding new skill sets will be part of this, as will exploring new avenues so Oregon agriculture can continue to thrive. It all boils down to doing more with less, and Oregon agriculture is ready for the challenge.

 

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