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USDA Chief Economist says farm income strong, but uncertainty looms

Speaking on a panel at the Ag Outlook Forum in Kansas City today, USDA Chief Economist Seth Meyer says farm income is up but so is farmer anxiety. 

"When one looks at farm income at a very high scale, farm income looks pretty good," he says. "But when you tell producers this, you always have to realize there's a tremendous amount of anxiety. Those input prices are catching up to them." 

Throughout his presentation he highlighted several drivers of that anxiety, a large one being volatility for both input prices as well as commodity prices. He told those in attendance that everything from fertilizer and seeds to labor went up in price in 2022.  

Nate Kauffman, vice president and Omaha branch executive for the Federal Reserve Bank of Kansas City, further analyzed the strength of the farm economy today compared to the pre-pandemic era. 

"Generally speaking, economic conditions in agriculture, with some caveats, are quite strong," he says. "Land values, for example, are about 25% to 30% higher than what we might have seen before the pandemic, and again that was a time that land values had been declining." 

He says loan delinquencies are at an all-time low and working capital is high. 

Yet, he says there are risks to this strong position, including shrinking economic growth, inflationary pressure, and rising interest rates. 

Meyer also discussed domestic and global supply and demand challenges.  

"Although at a global level we are likely to build stocks in soybeans, because of crush strength in the United States we'll probably end up with lower stocks in the United States."

He says U.S. demand for soy crush is on the rise, partly because renewable diesel production is increasing. 

Lower ending stocks for many commodities will be common on a global scale, he says. 

"We will end this marketing year tighter for many stocks than when we began," he says. 

Meyer says pre-pandemic, China was not a major buyer of U.S. goods but in a few short years has risen to number one. Meanwhile, other large buyers like Mexico and Canada have not reduce their demand for U.S. products, squeezing supply. 

Also squeezing supply is war in Ukraine. The country's ability to ship grain has been cut by more than half and storage capacity is tight, Meyer says. 

"The Ukrainians did a herculean effort getting that crop planted," he says. "Their going to have to do a herculean effort to get it harvested and yet, they will still have storage problems going forward...This continues to overhang the market and the Ukrainians themselves will have to rationalize their production in terms of what their output and contribution to the global market will be unless there is an ability to ship more grain." 

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