2023 has been a challenging year for U.S. agriculture. David Widmar, an economist with Agricultural Economic Insights, talks about some of the bigger stories of the year in agriculture.
“One of the big stories is declining net farm income. Big headline shocker there, but still historically high. So, we’ve got to balance those two narratives. It’s not been as good for all parts of the country. The Midwest and the Corn Belt have done really strong last three years collectively, so ’21, ’22, and ‘23 are the best three-run average that we’ve had since the 40s, so the best three years in most of our careers. Now on the other side of the narrative, we have commodity prices that have trended lower, especially on corn the last few years – another year. below trendline yields – and of course, interest rates. Not necessarily the short-term rates that the Fed adjusts at their meetings. We’re really watching these long-term rates.”
He says the volatility in agriculture will likely continue into 2024.
“That’s not necessarily all bad. We talked about it earlier. Despite record-high fertilizer prices, despite all the uncertainty around usage, demand, and inflation, the farm economy had a good run between 2011 and 2023. We might see some reversion to the mean, whereas net farm incomes could again be lower but not necessarily historically bad. We have to realize both at the farm level and at the sector level, the last three years are not normal. They’re not normal in terms of the amount of government payments and not normal in terms of money prices or profitability. So, we need to start recalibrating expectations for what’s normal and what should we plan on.”
Widmar talks about factors producers need to watch for when making decisions ahead of the 2024 growing season.
“One of the things we’re going to keep an eye on is acreage. There’s always an acreage reallocation, and one of the things that happened in 2023 in our observation is that we had a lot of corn acres and a little bit of soybean acres, and that’s resulted in this imbalance in ending stocks. So, corn ending stocks are above the long-run average, closer to 15 percent instead of the average of 13. Soybeans are closer to five or six percent instead of a long-run average of eight. So, we’re gonna see some acreage reallocation, so producers are gonna need to keep an eye on that relative price ratio and how that’s gonna impact their budgets. Also, we’re keeping an eye on fertilizer. Fertilizers came down a lot, and that’s going to benefit corn budgets quite a bit.”