Now that 2024 has transitioned to 2025, USDA’s Rod Bain and Department of Ag Chief Economist Seth Meyer discuss last year’s economic trends in the farm sector and how they might affect projections for this year’s economy on Agriculture U.S.A.
“What we are doing is looking for a little bit of direction going forward from this standpoint,” Meyer said. “Producers’ margins have narrowed significantly from a couple of years of really good, high farm income to more normal or farm income coming under some pressure.”
Looking further to the past four years, Meyer noted trade friction with China, pandemic issues, price increases stemming from the war in Ukraine, and production shocks around the world. While 2024 didn’t hold any similar earthshakers, it wasn’t without its own challenges.
“We haven’t had a shock that sends prices higher, so we have continued to grind lower for most of the year,” Meyer said. “We are looking for a bottom and looking for where we go from here.”
One example of declining commodity prices is in the cotton sector where prices in early 2024 were close to $0.80 per pound, they are now in the mid-sixty cent range. Meyer commented, “We have seen commodity prices year-over-year declining pretty much across the board.”
About livestock, he said, “While profitability has been better than on the crop side, I think there are remaining challenges for expansion in several of the livestock sectors.”
Continued decline in most commodity prices and tightening margins for producers are expected in 2025. “We definitely have to break things out into differences between crops and livestock, and overall, crops have faired worse and livestock faired better from an income standpoint, but not without some other issues,” Myers noted.
While commodity prices have fallen quickly, input prices have not. While fertilizer prices have come down, labor is expected to increase.
“The big question is, if we are done with that moderation, where does the market sit in relation to its ability to respond to another shock,” Meyer wondered. “That is why we are taking such a close look at South American production, Russian wheat production, etc. The market seems to be satisfied with where supplies are at for the moment. Usually, you see a confluence of forces that put another shock into the market, to set off another price spike or a big geo-political event which can work on both sides of the market – either positive or negative.”
Meyer expects a record trade deficit in the coming year due to several factors including a strong U.S. dollar overseas, increased global competition for primary U.S. farm commodities such as corn and soybeans, and U.S. consumers seeking imported items to diversify their diets.
Global challenges for the nation’s food and farm exports going forward include policy, the size of the South American crop, the ongoing conflict in the Black Sea, and other geopolitical tensions.
Agriculture U.S.A. audio provided by USDA.
