2024 has been challenging for farmers and the agricultural sector. David Widmar, economist and managing partner with Agricultural Economic Insights, says 2024 has been full of twists and turns.
“It has been interesting, lots of unexpected turns and uncertainty, and it’s going to set us up for even more uncertainty and surprises into 2025,” says Widmar. “It’s a farm economy with two outlooks, and one outlook is on the livestock side, especially cow-calf producers. They’re having a pretty strong year when we look at net farm income and the net farm come estimates coming out of USDA, and then the other side of that coin is crop producers, and especially corn and soybeans. In the Midwest, they’re having a really difficult year. So, we sort of have an economy that’s hitting the brakes on one side and hitting the gas on the other side. So, I think that’s going to take a lot of time to move through, to navigate through.”
We’ve also seen changes in the overall U.S. economy. “I think we’ve also seen a change in the macro economy,” says Widmar. “You have a situation where the Fed’s now starting to lower interest rates a little bit. So, we’ve seen a lot of that inflation uncertainty and inflation concern start to leave, so we’ll see how that resolves itself into 2025.”
While lower interest rates are a good thing, it’ll take a while before the ag economy notices an economic impact. “We went from three-and-a-half, four percent farm-level interest rates up to seven, seven-and-a-half percent, and now we’re coming down from seven-and-a-half percent to maybe six-and-a-half percent,” says Widmar. “We’ll start to see some improvement, but we went up a lot, and we’ve came down a little bit. The implications of interest rates will range from borrowing costs all the way to asset valuations, and so it’s going to take time to work its way through this system. But yes, time is going to be important. A little bit of relief for 2025, but long-term will be important to watch.”
For more insights, go to aei.ag.
Story courtesy of NAFB News Service
