Inflation

Atlanta Fed Chair Bostic Recognizes Sectors of Agriculture Are in Crisis

Tue, 10 Feb 2026 00:19:59 GMT

Is an economic crisis brewing in farm country? That’s the question Raphael Bostic, outgoing president and CEO of the Federal Reserve Bank of Atlanta, is watching as balance sheets carry over operating expenses into the 2026 season.

“There’s a lot of distress in agricultural marketplaces and in a lot of our agricultural enterprises,” Bostic says. “I do think there’s a significant crisis here.”

During a fireside chat at the 2026 Top Producer Summit , he recognized the challenges facing farmers in today’s financial environment.

“I get to talk to a lot of smaller family farms and I worry about them, especially because the big operations, they are so large scale, it gives you a diversity of possible strategies,” Bostic explains. “You can tap into different types of credit that can allow you to weather volatility a bit more readily, and we don’t see that for a lot of the smaller folks.”

To help, USDA is set to release $12 billion in “ Farmers Bridge Assistance ” payments toward the end of the month.

“This is a short-run patch on something that could be a long-run problem,” Bostic says.

Rising Expenses and the Growing Debt Burden

USDA is expecting net farm income to be $153.4 billion, which is down $4.1 billion from 2025. Economists say this year’s latest outlook continues to reflect declining receipts and an ongoing reliance on help from the government, which is expected to increase by 45% in 2026 alone.

“Total production expenses are forecast to increase almost $5 billion or 1%,” says USDA economist Carrie Litkowski. “On the farm sector balance sheet, assets, debt and equity are all forecast to increase.”

The latest Purdue University - CME Group Ag Economy Barometer in January found 21% of farmers surveyed expect their operating loan to increase over a year ago. Of those, a third say it’s because they’re carrying over unpaid operating debt from the prior year. In 2023 that number was only 5%.

“We know that input prices for a host of products are up,” Bostic says. “We know that competition at a global level is up. We know that the tariffs have put tremendous pressure on the competitiveness of American products overseas because of those dynamics, and we also know many commodity prices haven’t changed to offset these things. These are all incredibly challenging dynamics to wrestle with, and how we move forward is really an open question.”

Fed Policy: Why Patience is Required for Rate Cuts

The Fed’s primary mandate of stable prices and maximum employment provides an environment with predictable growth, giving people the opportunity to invest for the long haul without having to worry about where the economy will be in five to 10 years.

“First we have to diagnose the problem,” Bostic says. “Is this an issue with labor availability, an issue in new technology or shifting climate patterns, etc., and then we need to think about what strategies will work for all of these new things.”

That mandate requires patience in seeing how current monetary policy impacts the market. Bostic notes inflation remains above the Federal Reserve’s target of 2%, but economic growth has been and will continue to be robust. One thing he’s not advocating for is a continuation of interest rate cuts.

“The government shutdown actually prevented a lot of data from being produced, so it is actually going to make the numbers a bit choppier in the next several months,” Bostic explains. “The usual signals we would get from those [reports] are actually going to be weaker than they would be otherwise. For me, that’s another reason why I think we want to be cautious. We want to be patient, and I think that’ll be prudent.”

Patience ahead of additional rate cuts would allow the Federal Reserve to see how tax cuts and deregulation stimulate growth into 2026 before cutting rates, which could spur inflation even further above the Fed’s target.

At the 2026 Top Producer Summit, Raphael Bostic, president and CEO of the Federal Reserve Bank of Atlanta, joins Bill Watts, Pro Farmer editor, to share insights into the economic forces shaping monetary policy and what that could mean for agriculture.

(Farm Journal )

The ag economy is seeing similar challenges to the economy as a whole. Bostic remarks while the top end of the economy is doing remarkably well, there is a growing number of U.S. consumers who are living paycheck to paycheck, evidenced by the increased rhetoric around a K-shaped economy. That has made itself evident in the ag economy by higher consolidation, with big farms getting bigger and smaller farms going out of business.

“This economy has continued to perform well at an aggregate level; consumers have continued to be resilient, and that’s a good thing,” Bostic says. “My outlook is that the resilience we’ve seen for much of 2025 will continue into 2026 and might even get a bit stronger, so we might actually see some of the tax benefits, some of the deregulation, those things could actually spur the economy to do even more than what it did last year.”

Consolidation and the Transformative Potential of AI

The latest red flag, a sluggish labor market has Bostic waiting on data and wondering if technology or AI are having an outsized role in the current new-hire economy.

“When you think about AI, for example, and those technologies, businesses are experimenting with ways to have AI introduced into their production processes to allow productivity that doesn’t require people,” Bostic admits. “You may have heard reports about a lot of entry-level hiring has happened at a much lower pace than it has in previous years. A lot of that is because the promise of AI has folks thinking, well, maybe I don’t need to do those hires, and I can get that same amount of productivity. That’s a structural change.”

From a farming perspective, those opportunities are also presenting themselves. Given the current challenges in agriculture, Bostic says it might be time to look at new ways to build toward the future.

“To the extent that work can be done, that is, generative, without necessarily needing a person to be there all the time, that’s potentially transformative,” Bostic says. “I know the day is long, seasons are hard, and if you can use technology to take two hours out of it that gives you space to do other things. The opportunity there is what do you do with that extra space?”

Do Tariffs Work? Leading Ag Economists Weigh In

Fri, 15 Nov 2024 18:40:22 GMT

Tariffs are a tool used by both the President-elect Donald Trump during his first term and the current Biden administration. But do they work? Not even ag economists are in alignment, as the answer seems to be: It depends.

Trump didn’t shy away from his tariff stance on the campaign trail. He reinforced his plan to impose a 10% tariff on all imported goods and a 60% tariff on goods from China. And his latest threat is against Mexico, saying he will implement a 25% tariff on imports from Mexico if they don’t secure the border. Mexico is now threatening to fight back with tariffs of its own.

Trump has talked about increasing tariffs on foreign goods, particularly those from China. He has argued such import taxes would keep manufacturing jobs in the U.S., shrink the federal deficit and help lower food prices.

As Trump makes his key cabinet and advisory picks at a historic pace, the Financial Times reported last week that Robert Lighthizer could make an encore performance as the U.S. trade representative , and if his previous track record is any indication of what’s to come, tariffs will be a tool used by the Trump administration again.

“Trump and Bob Lighthizer are two peas in a pod when it comes to using tariffs to get what they want in among our trading allies,” says Jim Wiesemeyer, Farm Journal Washington correspondent.

So, that begs the question: Do tariffs work?

It’s something Farm Journal asked the nearly 70 ag economists that are part of the Farm Journal Ag Economists’ Monthly Monitor. The survey asked economists: “Do tariffs work in trade policy?” Economists views were mixed:

“Tariffs can work in trade policy — that’s why nations continue to use them. The complex part that extends beyond the tariff action is potential long-term repercussions that can result from trade flow changes.”
“In limited cases, typically only if they result in a policy response in the targeted country. Much of the time, tariffs are like cutting off one’s nose to spite one’s face.”
“Tariffs provide short-term gains but have always failed relative to free trade in the long term.”
“Absolutely, when properly applied.”
“Not over the long term. They tend to affect who gets to supply different markets around the world.”

The Ag Economists’ Monthly Monitor also asked: “When tariffs are used as a ‘tool’ in trade, who pays the tariff?” Not all economists were aligned on that answer either, saying sometimes it’s farmers and consumers, but it can also be the exporting countries.

“When the U.S. imposes tariffs on imports, importers in the U.S. pay taxes to the U.S. government on their purchases from abroad. When another nation imposes tariffs, importers in that nation pay import taxes to their government on their purchases from abroad. Often, when a tariff is implemented, another nation retaliates, and you end up with importers in both nations paying the price on whatever products the tariffs apply toward.”
“If an importing country places a tariff on the exporting country, producers in the exporting country and consumers in the importing country both lose (i.e., receive lower and higher prices, respectively). Conversely, producers in the importing country and consumers in the exporting country win (i.e., receive higher and lower prices, respectively).”
“In the short run, consumers who purchase goods with a tariff might see higher prices if the tariff is not absorbed elsewhere. In the long run, the tariff might result in changes to the supply chain that result in higher prices but also create other economic opportunities in America (e.g. reshoring of domestic manufacturing).”
“The correct economist answer is: It depends. Tariffs drive a wedge between prices in the exporting country and in the importing country. It depends on the circumstances of particular markets and how much is reflected in higher prices in the importing country and reduced prices in the exporting country.”
“Both the exporting nation and the importing consumer pay some portion of the tariff depending on who has more flexibility to adjust to trade barrier. If exporting countries can easily switch to supplying other markets, they won’t have to ‘pay.’ If consumers can easily find cheap substitute goods, they won’t have to pay.”

Trump threatened tariffs on Deere

During a policy roundtable in Smithton, Pa., organized by the Protecting America Initiative this fall, Trump made significant statements regarding John Deere and its plans to move some production to Mexico. Trump threatened to impose a 200% tariff on John Deere products if the company proceeds with its plan to relocate some of its manufacturing operations to Mexico.

“I’m just notifying John Deere right now. If you do that, we’re putting a 200% tariff on everything that you want to sell into the United States,” Trump says. “So that if I win, John Deere is going to be paying a 200%. They haven’t started it yet. Maybe they haven’t even made the final decision yet. But I think they have — John Deere is going to and anybody else that does this because it’s hurting our farmers. It’s hurting our manufacturing.”

Farm Journal asked economists the likely outcome if Trump did follow through with tariffs. Here’s what they said:

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The Reasons Behind the Painful Surge in Grocery Prices

Wed, 17 Jul 2024 16:04:05 GMT

The post-Covid surge in grocery prices has been a noticeable and financially painful part of the rising U.S. cost of living. Shoppers couldn’t miss the sharp price increases, such as the doubling cost of a can of tomatoes or the significant rise in beef prices.

Economist Thomas Klitgaard from the Federal Reserve Bank of New York analyzed the causes of this increase . Here are the key findings:

Food prices

(Liberty Street Economics)

Stable prices before pandemic: The consumer price index (CPI) for food-at-home was stable for the five years prior to the pandemic, indicating little change in grocery bills from 2014 to 2019.

Sharp increases during pandemic:
• 2020: Prices rose by 4%.
• 2021: Prices increased by 6%.
• 2022: Prices jumped by 12%.

Overall, the food-at-home index increased by 25% from Q4 2019 to Q1 2023.

Key components driving price increases:
• Commodity Prices: The underlying price of commodities, especially grains, saw significant increases. This rise cascaded down to other food items like beef, pork, poultry, eggs, and dairy products.
• Wages: The wage bill at supermarkets rose substantially, contributing to higher grocery prices.

Minor Impact:

• Price gouging: Klitgaard’s analysis suggests that price gouging by companies was not a significant factor in the price increases.

Wages

(Liberty Street Economics )

Bottom line:

The surge in grocery prices was driven mainly by substantial increases in commodity prices and supermarket wages, rather than price gouging. The stability of grocery prices before the pandemic underscores the dramatic impact of these factors during the early 2020s. While grain prices have slumped since 2022, the wage bill keeps going up — with average hourly earnings up 6% in May from a year before. And Klitgaard warns that may bode ill for shoppers going forward. “An open question is whether grocery inflation can stay as moderate as it has been since early 2023 with grocery worker wage inflation still elevated,” he wrote.

Rising potato prices aren’t hindering strong sales

Fri, 09 Dec 2022 16:17:19 GMT

The steady creep of potato prices has hit a five-year high, according to recent data from IRI. Reaching an average price per pound of $2.35 in the last quarter, the price of potatoes has consistently increased each year since 2018, which saw an average price of $1.79.

This, however, doesn’t appear to be dissuading consumers from picking up potatoes during their grocery runs.

According to the IRI Unify Retail Sales data, potato volume sales remain above pre-pandemic levels. Despite price increases, volume sales only dipped slightly — a 2.1% decrease from July to September 2022 compared to the same period in 2021, according to the data.

Additionally, retail sales increased in dollar sales by 17.8% from July to September 2022 compared to the same period in 2021.

Related news: U.S. fresh potato exports stronger

All categories of potatoes — with the notable exception of deli-prepared sides — increased in dollar sales, according to IRI data. Frozen potatoes led the category, having the biggest rise in dollar sales with a 22.8% increase year-over-year.

Fresh potato sales are up for all types of potatoes with the exception of fingerling and purple varieties, due to tight supply.

The pack sizes that saw the greatest increase in dollars were the 5-pound and 10-pound potato packs, increasing by 29.4% and 29.3%, respectively.

South Texas growers expect high-quality, light volume this winter

Mon, 21 Nov 2022 21:33:14 GMT

“For the next seven months, Texas is a great place to source your vegetables, fruit, onions and melons,” Dante Galeazzi, president and CEO of the Texas International Produce Association, told The Packer. “Combine Texas-grown with produce crossing from Mexico, you’ve got the whole shopping list in one little area.”

Winter vegetable season is well underway, and South Texas is ramping up for slightly lighter volume early in the season. This soft start is a result of hot and dry summer months that burdened an already tight water supply in Texas, stretching reservoirs thin and reducing soil moisture across the state, Galeazzi said.

“These hot temperatures can be challenging as we start the season, but we’re already starting to see the temperatures cool off a little,” he said. “We’re very fortunate in a sense because things are growing quickly because of those dry, warm temperatures; We’re just looking for a balance.”

Because of the water shortage and dry conditions, Texas acreage is down across commodities this year.

“Buyers can expect smaller supplies,” Galeazzi said. “But the quality is going to be superior, because if you’ve got less acres to look over, you’re going to give more attention to the product you do have.”

Jeff Brechler, head of sales and marketing at Little Bear Produce, said that despite planning water conservation and rationing measures, the Edinburg, Texas-based produce grower and shipper still ran out of water in South Texas irrigation districts.

“We had to scramble around and move plantings, which we were able to do. We started getting some rains [late summer] and they fell in the right area. We’re thankful for what we got, but we didn’t get enough to really get us over the hump,” Brechler said. “All it did was put us back to the level we were prior to conserving and rationing.”

Despite irrigation shortages and dry weather, a deluge of rain in August and September damaged the first fall cabbage crops at Little Bear Produce. Normal supplies of cabbage are expected as early as the second week of December, along with leafy greens, which were unaffected by the rains and maintained a steady supply.

“It’s been a bit of a rocky road,” Brechler said. “Hopefully, this pattern will change, and we’ll get into a bit wetter El Niño pattern. But that’s the life of the farmer, right?”

Once Texas growers recover crops from the summer heat, the focus turns to February. Two years after what has been dubbed the St. Valentine’s Day produce massacre — when many growers completely lost entire crops to an unexpected, extreme freeze — growers are still skittish.

“February seems to be the witching hour,” Brechler said. “Two years in a row we’ve had extreme weather in February. In 2021, it was the Valentine’s Day freeze. And last year we even had some cold damage that came in. As long as we can get through February, I think we’ll be OK.”

Inflation and labor pressures

At TIPA, Galeazzi has witnessed overhead expenses increase for growers this August by an average of about 22% to 23%. Meanwhile, grocery store prices for Texas produce have only seen about an 9% increase, he said.

This results in a 12% to 13% gap that produce growers must bridge, even if expenses and prices remain at this level, which is unlikely. According to Galeazzi, this estimate doesn’t account for rising diesel, fertilizer or labor costs. While the math indicates narrowing profits for growers staying competitive, for better or worse, these challenges are not unique to Texas, he said.

Beyond rising expenses, as costs associated with labor rise, labor shortages continue to worsen for growers throughout the Lone Star State.

“Texas was one of the last states to feel the pinch on labor shortages, and this is likely because we are a border state” Galeazzi said. “But we have felt that pinch.”

The situation has become more and more dire every year, he added.

Little Bear Produce is experiencing the labor shortage firsthand, according to Brechler. The challenge, he said, is finding staffing across the company; The shortage is not limited to one specific type of job.

“It’s just finding labor, period,” said Brechler. “Other folks are dealing with the same issues that we are with labor and, you know, everyone seems to be short-staffed. It’s just a tough period right now.

“The folks on the production floor have been doing a really good job of putting out fires,” he added. “But I think what leads to someone’s success rate has been just the culture of the company. You know, [Little Bear Produce] is a family-owned company … there’s a sense of pride.”

Fed to Hike Rates: Here's What You Need to Know

Wed, 15 Jun 2022 11:11:06 GMT

All signs point north. The Fed’s Federal Open Market Committee (FOMC) is meeting today and June 15. Investors and market-watchers are preparing for a potentially faster and steeper rate hike, as inflation data was worse than expected — hitting 8.6% in May.

In addition, the Producer Price Index for final demand increased 0.8% in May, seasonally adjusted. This rise followed advances of 0.4% in April and 1.6% in March. On an unadjusted basis, final demand prices moved up 10.8% for the 12 months ended in May.

The consensus ahead of the FOMC report is a jump of 0.5 percentage points, says Chip Flory, host of AgriTalk. Although some analysts say the Fed could raise rates by 0.75 percentage points — which would be the first time since 1994.

“First of all, there’s no question that they’re going to raise rates and signal they’re going to raise rates further,” says Vince Malanga, president of LaSalle Economics. “Whether it’s 50 or 75, I think there are legitimate arguments on both sides.”

Listen to the AgriTalk discussion between Malanga and Flory:

Malanga’s hope, while unlikely, is for an even larger rate hike.

“What I would like to see the Fed do is to raise rates by 100 points and show they are determined to fight this thing and get out ahead of the market rather than lagging behind,” he says. “Then they could step back and assess things and see how conditions transpire over the next month or two.”

Malanga says the probability of the Fed making such a rate hike is less than 10%.

The Fed does not want to surprise the market, Flory says: “But sometimes you’ve got to give the market a surprise to get the results that you want.”

“A little bit of uncertainty is not a bad thing,” Malanga agrees. “I think the economy is already in some sort of a recession, which is why I want them to do 100 basis points tomorrow. If they do 100, in six or eight weeks from now they’re going to see substantial slowdowns in sectors of the economy.”

Is the U.S. In A Recession?

Malanga believes the technology sector is already in a recession or leaning quickly toward one. “Silicon Valley is slowing down; we’re seeing announcements of layoffs,” he says.

The housing market is also in trouble.

“We’re going to see a significant slowdown in housing turnover over the next month or two,” he says. “That’s going to give us a significant weakening in home prices.”

In retail, Malanga says, there’s a mismatch between inventories and sales, which will lead to a slowdown in orders, markdowns and more.

“How that all translates into GDP is more statistical than real,” he says. “But I think the point is that we’re seeing increasing evidence of slowdowns across the economy.”

Read More

Is Out-of-Control Inflation on the Horizon? Watch These Two Indicators

The Warning Signs of a Recession Are Now Heating Up

Inflation Nation: The Long Road Ahead

4 Tax Items to Cross Off Your Operation's 2023 Checklist

Thu, 20 Oct 2022 13:42:50 GMT

The end of the year is closing in. Are you thinking about taxes? According to Paul Neiffer, farm CPA at CLA Connect, you should be.

Here’s a tax checklist Neiffer recommends based on events in 2022.

1. Be Specific When Writing Prepaid Expenses

Historically, Neiffer says farmers have taken advantage of “prepaid expenses,” but supply chain struggles have put a damper on that system.

“Producers can go to, say, a local cooperative and request a certain amount of fertilizer or diesel. That can be done now, but it’s getting tougher with availability,” says Neiffer. “This is when we run into a valid prepaid issue.”

In order to obtain a valid prepaid, a farmer has to request a certain quantity of a product. If a supplier isn’t able to provide that quantity, it isn’t a valid prepaid on additional business expenses for the year.

“So many farmers think they can go down to the local coop and put a deposit down on a product for large sums of money,” says Neiffer. “We’ve had several clients go through audits and fail on that front, despite our warnings. It just doesn’t work.”

For producers to take advantage of these last-minute prepaid business expenses, Neiffer suggests they lock in a “specific item, for a specific quantity, at a specific dollar.”

While preparing final prepaid expense checks, Neiffer says it’s equally as important to consider the checks handed out given by the government.

2. Stay Off the Tax Treadmill

Farmers sometimes climb on a tax treadmill ride that can last, in Neiffer’s experience, 40 to 50 years. With COVID-19 aid revenue attached to the tax treadmill in recent years, Neifer says it might be even harder to hop off in 2022.

The Biden administration released various phases of Emergency Relief Payments (ERP) to producers this year. These types of payments are similar to crop insurance and yes, they can normally be deferred one year, but the farmer can only defer to the year after damage was incurred.

“These payments are for damage that occurred in 2020 and 2021,” Neiffer says. “2022 is the latest you could defer 2021 payments and since producers collected them this year, they’re stuck with reporting these payments in 2022.”

Neiffer feels some ERP phase 2 payments might be deferrable, assuming it was for 2022 damage. However, “at the speed that FSA is proceeding,” he doesn’t think those odds are looking good.

The plans for unwanted revenue and deferments don’t stop at ERP.

3. Draft a Plan for Unwanted Revenue

With the ongoing drought in the West , some producers have been forced to make changes in the size of their operations.

Chip Flory, AgriTalk host, questioned Neiffer on whether cattlemen who are selling numerous head due to lack of feed and resources can plan a deferment .

“The good news is yes,” says Neiffer. “If a producer normally sells 500-head in a year and this year they had to sell 1,000-head, they get to take that extra 500-head and either defer for one year, or up to four, 5 or 6 years—depending on how long the drought goes on.”

Once the drought is over, Neiffer says cattleman could reinvest in the herd, even if it’s breeding stock.

“We had a rancher last year who kept track of how much livestock they had to sell due to the drought,” he says. “Based on the regulations, we were able to defer another $200,000 based on how the calculations were done.”

Another important calculation to consider tracking this year, according to Neiffer, is the adjustments in inflation.

4. Consider How Inflation Might Work in Your Favor

IRS released inflation adjustments this week for 2023. At a “whopping” 7 percent, Neiffer says this is the time when inflation can work in favor of anyone’s pocketbook.

“Because each tax bracket is going up by 7%, everybody is going to be able to participate in the benefit of that 7% increase,” he says. “That increase is actually greater than the exemption was until about 20 years ago, so that’s really good news for most of our farmers.”

The 2023 tax inflation adjustments will also be reflected in:
• Lifetime estate tax exemption
• Annual gifts
• Standard deductions

Neiffer says the bottom line is inflation helps us with our taxes, but in very few other ways.

More on taxes:
No, You Really Can’t Defer Your ERP Payment
Paul Neiffer: When Can Inflation Help You?
When Can You Defer Livestock Sales Due to Drought?
The Social Security Donut Hole

IMF Anticipates Global Inflation Will Peak in Late 2022

Tue, 11 Oct 2022 18:10:47 GMT

The International Monetary Fund forecasts a slowdown in global growth from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023.

The global slowdown in 2022 is as projected in the July 2022 World Economic Outlook (WEO) update, while the forecast for 2023 is lower than projected by 0.2 percentage point. In the revised forecasts , 93% of countries received downgrades to their growth outlook.

More to Come

Aside from the global financial crisis and the peak of the Covid-19 pandemic, this is “the weakest growth profile since 2001,” the IMF said in its WEO published Tuesday morning.

“The worst is yet to come, and for many people 2023 will feel like a recession,” the report said, echoing warnings from the United Nations, the World Bank and many global CEOs.

Cause for Shift

The IMF noted three major events currently hindering growth: Russia’s invasion of Ukraine, the cost-of-living crisis and China’s economic slowdown. Together, they create a “volatile” period economically, geopolitically and ecologically.

More than a third of the global economy will see two consecutive quarters of negative growth, while the three largest economies — the United States, the European Union and China — will continue to slow, the report said.

Inflation Timeline

The IMF anticipates global inflation will peak in late 2022, increasing from 4.7% in 2021 to 8.8%, and that it will “remain elevated for longer than previously expected.”

Global inflation will likely decrease to 6.5% in 2023 and to 4.1% by 2024, according to the IMF forecast. The agency noted the tightening of monetary policy across the world to combat inflation and the “powerful appreciation” of the U.S. dollar against other currencies.

Red Flags

The IMF also highlighted that the risk of monetary, fiscal, or financial policy “miscalibration” had “risen sharply,” while the world economy “remains historically fragile” and financial markets are “showing signs of stress.”

In an interview with the Financial Times , Pierre Olivier Gourinchas, the IMF’s chief economist, said there was as much as a 15% chance global growth could fall below 1% eventually. This level would likely meet the threshold of a recession and would be “very, very painful for a lot of people.”

“We are not in a crisis yet, but things are really not looking good,” he said, adding that 2023 would be the “darkest hour” for the global economy.

The energy crisis is also weighing heavily on the world’s economies, particularly in Europe, and it “is not a transitory shock,” according to IMF’s report. “The geopolitical re-alignment of energy supplies in the wake of Russia’s war against Ukraine is broad and permanent,” the report added. “Winter 2022 will be challenging for Europe, but winter 2023 will likely be worse,” the IMF said.

The U.S. economy is expected to stagnate over the four quarters of 2022 and then maintain a sluggish 1% growth rate in 2023.

More on inflation:

Could Food Prices Ease in 2023? USDA’s New Consumer Food Price Forecast Has a Bit of Good News
Is Out-of-Control Inflation on the Horizon? Watch These Two Indicators
John Phipps: The Inflation We Expect

How to know when agriculture is in a recession

Fri, 06 Sep 2024 17:18:49 GMT

Agriculture can sometimes act as a buffer during broader economic recessions, as demand for essential food items tends to remain relatively stable. However, when multiple indicators align, it can signal a recession in the agricultural sector.

According to analysts and economists, pay particular attention to the following:

Declining farm income. A significant drop in net farm income is a major sign. For example, USDA forecasts another major decline in farm income for 2024, on top of the big decline in 2023. That would be the largest ever two-year decline.
Sharply declining commodity prices. Weak prices for major crops and livestock products can indicate economic trouble for farmers. Crop prices have seen sharply declining prices, with the meat sector showing continued strength.
Elevated input prices costs. When input costs such as fertilizer, fuel and labor remain elevated while commodity prices fall, it squeezes farm profitability.
Reduced agricultural exports. Slowing exports and a growing trade deficit in agriculture can signal economic challenges. USDA forecasts the third straight year of a U.S. ag trade deficit , with the fiscal year 2025 at $42.5 billion.
Debt vs. cash flow. Increasing farm debt relative to cash flow combined with higher borrowing costs due to interest rate increases can strain farm finances.
Weakening credit conditions. Lower repayment rates on farm loans and increased loan renewals/extensions can indicate financial stress.
Declining demand for agricultural products. Reduced consumer spending on discretionary food items during broader economic recessions can impact certain agricultural sectors.
Falling farmland values. Higher interest rates and lower farm profitability can lead to downward pressure on land prices .
Increased inventory levels. Growing stockpiles of crops and livestock products can spur further price declines.
Widespread financial stress. When a large number of farmers across different regions and commodity sectors experience financial difficulties simultaneously it can point to an industry-wide recession.

The Warning Signs of a Recession Are Now Heating Up

Fri, 03 Jun 2022 15:45:23 GMT

From record-high gas and diesel prices on the road to a major spike in the price Americans paid for their Memorial Day weekend barbecue essentials, shoppers are seeing price spikes everywhere they go.

The unofficial kickoff to this grilling season came with sticker shock that’s been mounting over the past year.

(Farm Journal)

The latest Consumer Price Index (CPI) shows despite the overall pace of headline inflation easing, the cost of groceries alone increased 10.8 percent since April 2021, which is the largest annual increase in 42 years. The jump is being driven largely by the prices of meat, poultry and fish, up 14.3 percent in the past year, which marks the largest 12-month increase since 1979.

Glynn Tonsor , an agricultural economist with Kansas State University, says there are two major drivers of the price hikes for consumers.

“One reason is they still like protein,” says Tonsor. “Demand overall is strong, certainly compared to pre-pandemic levels. There is a little bit of weakness building, but demand pulls prices up, and the cost of producing meat is also up.”

(Farm Journal)

It’s not just meat causing price pain. Just before Memorial Day weekend, the national average price for a gallon of gas hit another new record of $4.59 a gallon, which is 47 cents above where prices were just a month ago, and $1.56 more than what drivers paid a year ago.

“We’re on the road in the summer more, so we may not be done with those higher gas prices is the point,” adds Tonsor. “Yes, it does eat pocketbooks. All else equal, if one input and your budget goes up, that eats into your discretionary income for other categories. And we are watching that.”

A JP Morgan Chase analyst recently projected gas prices could top $6 a gallon by August , and the thought of higher gas prices is already drawing concerns about the price pain eating into meat demand.

“There are some warning signs and a little bit of easing on meat demand for some consumers,” says Tonsor. “Those that haven’t changed jobs and haven’t had a pay raise may not have a wealth effect from the stock market, that group has the ones who are feeling the pinch the hardest, because they’ve taken a net pay cut in the last six to 12 months, due to inflation.”

(Farm Journal)

With concerns of a recession, the meat industry is watching the economy closely. Midan Marketing recently surveyed consumers and found 54% of them say they are purchasing about the same amount of meat products, while 32% are starting to buy less.

“We have consumers that are feeling the real tight crunch of the wallet. And what they’re doing is they’re trading down, they’re staying in meat right now, they haven’t traded out,” says Danette Amstein, principal, Midan Marketing.

Recession Talk

Shoppers may be purchasing more hamburger versus steak today, but the true test for meat demand may be in the coming months, as the economy battles historic inflation, especially with talk of a possible recession.

“Pessimism is pretty high with typical consumers as we speak,” says Tonsor. “In the past, that can be a barometer for recession coming.”

Tonsor says it’s not the only measure of inflation, but if consumers start to taper their spending because they’re concerned, then it can cause what’s called a self-fulfilled recession.

“I think that’s the most common narrative on the street now, in response to 6%, 8% inflation, depending who you ask. Consumers are tightening their belt, and maybe that will reduce demand for products enough that that induces a recession in 2023. That’s not a guarantee. But we need to watch that, because the meat industry is very prone to consumer incomes.”

Are Consumers Better Prepared for Inflation?

Warning signs of a recession are already gaining steam with various headlines. However, one major fund manager thinks a recession won’t have the same impact it did nearly 15 years ago.

Dawn Fitzpatrick, who is the chief executive and chief investment officer of Soros Fund Management, recently told Bloomberg that since the the U.S. consumer is in “extraordinarily” good shape, she thinks the economy will better weather expected rate hikes by the Federal Reserve.

“Rate increases will slow the economy and will impact inflation, but this economy has some shock absorbers built in,” Fitzpatrick said on “ Bloomberg Wealth with David Rubenstein. ”

Fitzpatrick argues even with wage growth behind the current rate of inflation, Americans are still flush with enough cash to pay down their credit card balances.

Beef Demand and Inflation

Tonsor says while there’s not one strong indicator a recession is imminent, domestic meat demand hinges on whether the U.S. economy runs out of gas.

“Beef demand, in particular, historically, is tied to consumer incomes. If we have a recession, we would anticipate weaker beef demand and maybe protein demand overall, but particularly beef demand,” says Tonsor.

Tonsor says typically a recession isn’t defined until after the fact, but watching consumer confidence, as well as shopping habits, are both solid indicators of what’s to come.

Inflation ticks slightly higher in November

Wed, 11 Dec 2024 15:31:43 GMT

Year-over-year overall U.S. inflation checked in at 2.7% in November, slightly higher than the 2.6% pace reported in October, according to the Dec. 11 consumer prices report from the Bureau of Labor Statistics.

The grocery food index rose 1.6% over the last 12 months, while the BLS said the restaurant food index rose 3.6% over the last year. The index for limited-service restaurant meals increased 3.7% over the last 12 months, and the index for full-service restaurant meals rose 3.6% over the same period.

The report said the grocery price index for meats, poultry, fish and eggs rose 3.8% over the last 12 months and the index for nonalcoholic beverages increased 2.8%. Over the same period, the fruits and vegetables index rose 1.1% and the other food at home index increased 0.7%, according to BLS data. The index for dairy and related products increased 1.2% over the year. In contrast, the cereals and bakery products index declined 0.5% over the last year, the largest 12-month decline since December 2017.

“Today’s CPI numbers show that inflation is a stubborn thing, and the U.S. still has some work to do to fully tame it,” Andy Harig, FMI — The Food Industry Association vice president for tax, trade,sustainability and policy development, said in a statement. “Food-at-home remains well below the Fed’s overall 2% target, coming in at 1.6% on a year-over-year basis.”

Harig said the slight tick upward to 0.5% in the monthly figure for grocery prices bears watching.

“Increases in the price of eggs (8.2%) — driven by avian influenza — and the price of beef (3.1%) — driven by high input costs — both point to challenges the food and agriculture supply chain are working to address,” he said. “But November’s numbers continue to demonstrate that, for consumers looking for affordability, eating at home is still the best bet.”

Harig said 85% of grocery shoppers report that they have at least some control over their grocery expenses.

“To support shoppers as they plan their holiday meals, the food industry is committed to providing value to customers through discounts and sales, private brand and local product offerings as well as the deployment of new technologies to enhance the shopping experience,” he said.

Food inflation to drop further in 2025, USDA predicts

Tue, 31 Dec 2024 19:12:57 GMT

Food inflation will decline further in 2025, according to the latest Food Price Outlook from the USDA’s Economic Research Service report.

Using data through November, the USDA said 2024 prices for all food are now predicted to increase by 2.3%, with a prediction interval of 2.2% to 2.3%.

Grocery (food at home) food prices in 2024 are predicted to increase by 1.2%, with a prediction interval of 1.1% to 1.3%, according to the USDA.

Restaurant (food away from home) prices are predicted to increase by 4.1% in 2024, with a prediction interval of 4% to 4.2%, the USDA said.

In 2025, overall food prices are anticipated to rise at a slower pace than the historical average rate of growth, the USDA said. In 2025, the USDA said prices for all food are predicted to increase by 1.9%, with a prediction interval of -1.2% to 5.2%.

Grocery food prices are predicted to increase by 0.8% in 2025, with a prediction interval of -3.7% to 5.8%. The USDA said restaurant prices are predicted to increase by 3.5% in 2025, with a prediction interval of 1.8% to 5.3%.

Fruit and vegetable spike

The USDA said farm-level fruits and vegetables experienced large price increases in November 2024. Farm-level fruit prices rose by 21.8% in November and were 11% higher than in November 2023, according to the report.

Prices for farm-level vegetables increased by 33.2% in November and prices were 34.3% higher than last year, the USDA said.

“Although prices for these categories were higher year-over-year compared with November 2023, prices are expected to fall or grow slowly on average in 2024, due in part to lower input costs and higher production for some products,” the USDA said.

Prices for farm-level fruits are predicted to decrease by 1.9% in 2024, with a prediction interval of -3.1% to -0.7%, the report said. Prices for farm-level vegetables are predicted to increase by 0.5% in 2024, with a prediction interval of -1.7% to 3.4%.

All-food grocery food inflation rates:

2020 — 3.5%.
2021 — 3.9%.
2022 — 11.4%.
2023 — 5%.
2024 (forecast) — 1.2%.
2025 (forecast) — 0.8%.

Source: Bureau of Labor Statistics and USDA