Ag experts warn the industry faces a handful of issues this year. The American Farm Bureau’s Chief Economist lays out several challenges that will impact the markets this year.
Last year alone, the World Food Program estimated over 800 million people worldwide went to bed hungry, with 49 million teetering on the edge of famine.
“After decades of improvement in food security around the world, we’ve got a growing number of folks who are not really finding it easy to feed themselves and their family. There’s been a big bump about 200 million more people were food insecure in the world in 2021 then there were three or four years before that, and there’s a lot of things behind that,” said Roger Cryan.
After 40 years of good fortune, Cryan says there are many challenges coming this year.
“The fall of the Soviet Union opened up markets in those former Soviet republics. The same Soviet Union that couldn’t feed itself and had to buy grain from the US in the 70s, now Russia and Ukraine are two of the world’s bread baskets. We’ve got continuing benefits from the Green Revolution and biotech and precision ag. We’ve had benefits, enormous benefits from the expansion of free trade, that allows folks to do what they do best. We’ve had stable growth and stable inflation and we’ve had a lot of peace and now we’ve got a lot of challenges,” Cryan said.
Cryan says Russia’s war in Ukraine is one of the bigger challenges affecting world food security.
“War has hit us in a very tough spot in terms of world food supplies because not only have been grains cut off and production will be down in Ukraine next year, fertilizer supplies from those parts of the world have also been cut off. There’s been a move away from free markets in places like China and Russia. We’re falling behind on free trade. Free trade is no longer popular. We have perceived environmental challenges and real environmental challenges. We have a growing population and not only is the population growing, they demand a better diet, and we have rising farm input costs,” said Roger Cryan.
Cryan says inflation and interest rates are other challenges facing agriculture, with inflation levels we have not seen in nearly 40 years.
“These interest rates that the Fed sets really have a big impact on short-term interest rates, which raises the cost of operating loans and so forth, but also the combination of rising inflation and the higher short-term interest rates has contributed to higher long-term interest rates. Hopefully, these have already peaked, but all that is promising some problems. In 2023 and 2024 we’ll be talking about the cost of credit and in 2025 and beyond, we’ll be talking about the burden of debt,” said Cryan.
Cryan says he is hopeful that interest rates have already peaked, but he says in the coming years there will be lots of talks surrounding the burden of all this debt.
Despite all the expected issues within the markets this year, there is still some good news for U.S. producers. USDA released a report showing total household income has risen for commercial farms for several years.
From 2015-2021, the median total household farm income rose an estimated 16 percent. In 2021, the total household income remained above $75,000. Commercial farms earned more than $350,000 in gross cash farm income regardless of the operator’s occupation.
