Inflation
While inflation remains above the Federal Reserve’s target of 2%, the outgoing president and CEO favors a pause on interest-rate reductions while noting AI’s potential to shift labor needs
Farm economists say today’s ag slowdown “isn’t a collapse, but it’s a grind.” From trade woes to rising costs and consolidation, experts warn recovery could take time, even as livestock markets stay strong.
On the surface, strong livestock prices and government payments are painting a rosy picture for the farm sector. A closer look at input costs, commodity prices and interest rates says otherwise.
The March Ag Economists’ Monthly Monitor asked economists if they think the U.S. general economy will see a recession in 2025. 62% said yes.
Trump recently signed three executive orders imposing tariffs on Canada, Mexico and China. This marks the first time a president has used powers granted under the International Emergency Economic Powers Act of 1977.
Based on a farmer poll and the Ag Economists’ Monthly Monitor, farmers and economists differ on whether Harris or Trump would be better for agriculture, particularly when it comes to trade.
USDA’s current net farm income forecasts show a $90-billion plus drop over the two-year period, making it the largest dollar value loss, adjusted for inflation, that agriculture has ever seen.
Agriculture can sometimes act as a buffer during broader economic recessions, as demand for essential food items tends to remain relatively stable. However, when multiple indicators align in the industry, it can signal a recession.
Vice President Kamala Harris is expected to propose several economic measures aimed at addressing key voter concerns such as housing and grocery costs with a federal ban on price gouging.
The report from the Labor Department on Wednesday added to a mild increase in producer prices in July in suggesting that inflation was firmly back on a downward trend. That should allow the U.S. central bank to focus more on the labor market amid growing concerns of a sharp slowdown.
A new Kansas City Fed report shows farm incomes continued to weaken, particularly in crop-heavy states like Kansas, Missouri, and Nebraska, while cattle prices provided some support.
Recessions often lead to decreased demand for certain agricultural products, particularly those considered discretionary, such as cotton, dairy, specialty meat products and vegetables. This can result in lower prices for these commodities, affecting farmers’ revenues.
Top Federal Reserve officials said on Wednesday the U.S. central bank is “closer” to cutting interest rates given inflation’s improved trajectory and a labor market in better balance, remarks that set the stage for a first reduction in borrowing costs in September.
New research finds the surge in grocery prices was driven mainly by substantial increases in commodity prices and supermarket wages, rather than price gouging.
Federal Reserve Chair Jerome Powell’s testimony before the Senate Banking Committee provided several key insights into the current economic landscape and potential future monetary policy actions.
Headwinds in interest rates, inflation and commodity prices seem to have little impact on land values, though single-digit decreases in Indiana, Kentucky, Michigan and Ohio have been reported.
The Federal Reserve has four more chances this calendar year to cut interest rates. Since July 2023, the system has kept its benchmark interest rate steady at a 23-year high of 5.25% to 5.5%.
The Federal Reserve voted to keep the benchmark interest rate steady despite a sticky inflation proving to be a challenge. Where could interest rates go? A conversation with Austan Goolsbee, president of the Chicago Fed.
The May Ag Economists’ Monthly Monitor found even with improved commodity prices over the past month, ag economists’ views on the net farm income picture slightly eroded, falling to $110.4 billion in May.
From the election to world trade, as well as geopolitical factors that have the potential to shape agriculture in 2024, the December Ag Economists’ Monthly Monitor shows the possibility of several economic surprises.
Analysts say an initial cut could be made as early as first quarter 2024. One of the key factors the central banking system will consider is whether its inflation rate target of 2% has been achieved.
Farmers are opting to tap into their savings from recent prosperous years instead of taking out loans at the highest interest rates since 2007, according to surveys conducted by regional Federal Reserve banks.
While ag economists continue to be at odds when it comes to the likelihood of a recession in the U.S., some doubt the country’s biggest importers will be able to avoid a recession over the next 18 months.
For 2024, USDA projects that food price inflation will be lower than that seen in 2023 and significantly lower than the rise seen in 2022.
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Meanwhile, service prices and the core index (which excludes food and energy) remain high, with the core CPI descending to 4.8%.
The CPI for May shows egg prices experienced the largest monthly drop in 72 years, but the price consumers are paying for a dozen eggs is still well above average over the past 10 years.