The strong agricultural economy, fueled by high commodity prices, has reduced farmers' reliance on farm lenders, despite concerns about rising input costs, according to a Federal Reserve survey of ag bankers. "Higher costs are likely to put upward pressure on demand for credit, but strong farm income and working capital could also supplement financing for some borrowers," said the Kansas City Fed on Thursday.
Despite the disruptions of the pandemic, U.S. farm income, a broad measure of profits, will be the highest since 2013, thanks to strong corn, soybean, wheat, broiler, cattle, and hog prices this year, said the USDA on Wednesday. "It is primarily a price story," said USDA economist Carrie Litkowski.
Strong consumer demand for meat and labor shortages at packing plants were factors in persistently high meat prices this year, said the USDA on Tuesday in a monthly report on food inflation. Meat prices were forecast to climb by 6.5 percent this year, double its long-term average of 3.2 percent annually.
The red-hot U.S. recovery from the pandemic, with the fastest economic growth rate since 1984, will moderate to a still-strong 3.5 percent in 2022, said the USDA in its first look at the agricultural economy in the new year. Farm-gate prices for corn, soybeans, wheat and cotton, the four most widely planted crops, were projected to decline as production, suppressed by the pandemic, catches up with demand.
Higher prices for corn, soybeans, hogs, cattle, and broiler chickens — top U.S. ag products — will boost net farm income to $113 billion this year, the highest since 2013, estimated the Agriculture Department on Thursday. Income would be 26 percent higher than the 10-year average, reflecting the economy-wide recovery from the pandemic.
Propelled by the global economic recovery from the pandemic, U.S. farm exports will set back-to-back sales records this fiscal year and in the new year beginning on Oct. 1, the government forecast on Thursday. China would account for $1 of every $5 in exports during the two-year span, with annual purchases running more than $10 billion above its previous record, set in 2014.
The federal program that pays landowners to take environmentally fragile land out of crop production to prevent erosion, protect water quality, and preserve wildlife habitat will expand for the first time this year after losing ground annually since 2007. The USDA said on Monday that it expected a net gain in acreage in the Conservation Reserve Program, which was retooled in April to help slow climate change.
Fueled by strong commodity prices and continued pandemic assistance, farmland values are skyrocketing, up by 14 percent in the central Midwest and by 10 percent in the central Plains, said the Federal Reserve banks in Chicago and Kansas City on Thursday.
Global trade in food and agricultural products grew by 3.5 percent last year, according to the WTO, leading to descriptions that the sector was robust and resilient in the face of the worst pandemic in a century. However, a USDA working paper says the impact of the coronavirus was obscured by such factors as the de-escalation of the Sino-U.S. trade war.