After COVID’s chill, a hot recovery is at hand
The U.S. economy could grow at its fastest rate — 7% — in nearly four decades, with the farm sector sharing in the energetic recovery from the pandemic, said CoBank on Thursday. “Many in the agricultural industry are experiencing the best market conditions since 2013,” said the lender in a quarterly assessment of the sector.
“Prices are hovering near multiyear highs as strong exports and dwindling supplies have solidified a healthy outlook for much of the farm economy,” said CoBank, based in Denver. “Consensus forecasts point to 7% GDP growth for 2021, the fastest rate of expansion since 1984.”
The USDA has forecast record ag exports of $157 billion this year, up 16% from 2020, as the world awakens with an appetite for food from the economic recession that accompanied the pandemic. U.S. farm income is expected to be 20% higher than its 10-year average, with producers pocketing more revenue from crops and livestock and relying less on federal payments.
“Financially strong” crop farmers plan a 3% expansion of corn, soybean, and wheat plantings, which should mean more business for farm supply retailers, said CoBank. Fertilizer prices surged in late winter and are now 96% higher than they were at their low point in May 2020. Still, “[w]hile much of the Midwestern Corn Belt is free of drought, some areas of concern surfaced in late March,” CoBank said.
Gov. Doug Burgum declared a statewide drought disaster in North Dakota on Thursday: 70% of the cattle- and wheat-producing state is listed in extreme drought, meaning major crop losses are possible. Parts of the upper Midwest are dry as the planting season begins, and drought is established in the northwestern corner of Iowa, the No. 1 corn state, said the weekly Drought Monitor.
Corn ethanol production has recovered for the most part from the pandemic and is running at 90% of usual levels. Fuel demand will rise as more Americans get vaccinated and they become increasingly comfortable out in public. Still, in the longer run, electric vehicles may constrain demand for liquid fuels. “To help offset the inevitable decline in fuel consumption, the ethanol industry must continue to both diversify its product mix and push for expanded fuel ethanol blending rates under the Renewable Fuel Standard,” wrote CoBank economist Scott Zuckerberg.
President Biden’s $2 trillion infrastructure package could carry substantial implications for rural power, water, and broadband providers, depending on congressional approval of proposals that include $100 billion to make broadband available to all Americans, said CoBank. “Hundreds of billions of dollars of funding would reshape these industries.”
Beyond specific proposals, Cobank vice president Dan Kowalski pointed to a change in tone. “The policy focus in Washington is shifting from crisis management to building for the future.”
The quarterly CoBank report is available here.