Ag Economists Signal Growing Concerns Over U.S. Agriculture Recession
Source: DairyNews.today
The U.S. agricultural economy is facing increasing pessimism, with over 50% of agricultural economists now believing that the sector is already in a recession, according to the August Ag Economists’ Monthly Monitor.
This alarming outlook is driven by plummeting corn prices, which have reached a four-year low, and the mounting financial pressure on crop producers.
Scott Brown, interim director of the Rural and Farm Finance Policy Analysis Center at the University of Missouri, noted that the latest survey results reflect some of the most pessimistic readings in recent years. Nearly 60% of the surveyed economists believe that U.S. agriculture is on the brink of a recession, while more than half already consider the sector to be in one. This marks a significant shift in sentiment compared to just 16 to 24 months ago.
Economists cited the sharp drop in crop prices and cash receipts as primary factors contributing to lower net incomes and increased financial stress, particularly for leveraged producers. Although the situation in the animal agriculture sector is less dire, with higher prices for cattle and milk, the overall economic picture remains bleak.
Livestock Prices Mitigate Some Concerns
Despite the overall downturn, strong cattle prices have provided some relief to the agricultural economy. Brown emphasized that without these higher livestock prices, the net farm income situation would be even more dire. However, the broader trend of declining crop prices, coupled with stable production expenses, suggests that the financial outlook for U.S. farmers will continue to worsen.
Net Farm Income Forecasts Continue to Deteriorate
The U.S. Department of Agriculture’s (USDA) Economic Research Service (ERS) had already forecast a decline in net farm income for 2024, following record highs in 2022. According to the USDA’s February forecast, net farm income is expected to decrease by $39.8 billion (25.5%) to $116.1 billion in 2024. Similarly, net cash farm income is forecast to fall by $38.7 billion (24.1%) to $121.7 billion. These projections have fueled expectations that the USDA may revise its forecasts even lower in the upcoming September update, with nearly 57% of economists predicting further downward adjustments.
Factors Influencing Crop and Cattle Prices
Looking ahead, economists outlined several key factors that will impact crop and cattle prices over the next six months. For crops, the growing size of the U.S. crop, limited exports, bioenergy and feed demand, and South America’s weather and crop size will be critical. Additionally, potential new tariffs and the relationship with China, along with fertilizer prices and their effect on 2025 acreage, will play significant roles.
In the cattle market, weaker demand, lower corn prices, and the possibility of tighter cattle numbers are expected to influence prices. However, economists remain cautious about the potential impact of a broader economic recession on beef demand.
Underreported Risks and Concerns
The August Monthly Monitor also highlighted several concerns that economists believe are not receiving adequate attention in the media. These include the deterioration in farm liquidity, the growing disparity between crop and livestock producers, and the implications of rising tariffs. Other concerns include the continued pressure on U.S. farmers to adopt more sustainable practices, which could lead to higher costs and increased regulation, as well as the potential for vertical integration in crop farming.
As the agricultural sector navigates these challenges, the coming months will be critical in determining the depth of the economic downturn and the potential for recovery.
Scott Brown, interim director of the Rural and Farm Finance Policy Analysis Center at the University of Missouri, noted that the latest survey results reflect some of the most pessimistic readings in recent years. Nearly 60% of the surveyed economists believe that U.S. agriculture is on the brink of a recession, while more than half already consider the sector to be in one. This marks a significant shift in sentiment compared to just 16 to 24 months ago.
Economists cited the sharp drop in crop prices and cash receipts as primary factors contributing to lower net incomes and increased financial stress, particularly for leveraged producers. Although the situation in the animal agriculture sector is less dire, with higher prices for cattle and milk, the overall economic picture remains bleak.
Livestock Prices Mitigate Some Concerns
Despite the overall downturn, strong cattle prices have provided some relief to the agricultural economy. Brown emphasized that without these higher livestock prices, the net farm income situation would be even more dire. However, the broader trend of declining crop prices, coupled with stable production expenses, suggests that the financial outlook for U.S. farmers will continue to worsen.
Net Farm Income Forecasts Continue to Deteriorate
The U.S. Department of Agriculture’s (USDA) Economic Research Service (ERS) had already forecast a decline in net farm income for 2024, following record highs in 2022. According to the USDA’s February forecast, net farm income is expected to decrease by $39.8 billion (25.5%) to $116.1 billion in 2024. Similarly, net cash farm income is forecast to fall by $38.7 billion (24.1%) to $121.7 billion. These projections have fueled expectations that the USDA may revise its forecasts even lower in the upcoming September update, with nearly 57% of economists predicting further downward adjustments.
Factors Influencing Crop and Cattle Prices
Looking ahead, economists outlined several key factors that will impact crop and cattle prices over the next six months. For crops, the growing size of the U.S. crop, limited exports, bioenergy and feed demand, and South America’s weather and crop size will be critical. Additionally, potential new tariffs and the relationship with China, along with fertilizer prices and their effect on 2025 acreage, will play significant roles.
In the cattle market, weaker demand, lower corn prices, and the possibility of tighter cattle numbers are expected to influence prices. However, economists remain cautious about the potential impact of a broader economic recession on beef demand.
Underreported Risks and Concerns
The August Monthly Monitor also highlighted several concerns that economists believe are not receiving adequate attention in the media. These include the deterioration in farm liquidity, the growing disparity between crop and livestock producers, and the implications of rising tariffs. Other concerns include the continued pressure on U.S. farmers to adopt more sustainable practices, which could lead to higher costs and increased regulation, as well as the potential for vertical integration in crop farming.
As the agricultural sector navigates these challenges, the coming months will be critical in determining the depth of the economic downturn and the potential for recovery.
