Farmers Face Another Tough Year As Costs Continue to Climb: The Kiplinger Letter
The fortunes of farmers and the agricultural sector have a major impact on the prices we pay for essential goods and, therefore, the wider economy.
The fortunes of the agricultural sector have a major impact on the prices we pay for essential goods and, therefore, the wider economy. To help you understand what is going on in the economy our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
Farmers have another tough year ahead. Farm income is expected to decline for the second consecutive year after a record 2022. Farm income will fall by $39.8 billion, or 25.5%, in nominal dollars. The bulk of the decline will come from lower cash receipts for crops and livestock, as commodity prices continue to decline after their 2022 spike.
Direct government payments to farmers will also be lower for the fourth consecutive year, reflecting the full phaseout of pandemic-era aid, as well as declines in other forms of assistance. But production expenses will keep climbing, by an expected 4.0%, or $16.7 billion, over last year. Even as the rate of inflation eases, interest expenses are on the rise, as are fertilizer costs after falling in 2023.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Costs will decline in only one major category: Fuels and oils. Federal officials anticipate a 7% drop. Note the current debate over reference prices, on which many farm safety-net programs are based. Reference prices use price and revenue histories to determine when to trigger crop subsidy payments, for example. But critics say they are too slow to update and can leave farmers feeling squeezed in years like this. Congress is debating a fix in the next farm bill.
Higher expenses have up-ended previous benchmarks of farm profitability. Corn, for instance, is holding above $4 per bushel, once a favorable price for farmers, but not now. Stockpiles remain high, and demand will not be enough to absorb them, especially with livestock farmers slashing herd sizes last year because of weak demand and drought. Dry conditions persist in key regions, including the Upper Midwest. Plentiful global supplies, from Brazil, in particular, will ding U.S. exports.
The U.S. is expected to run its largest agricultural trade deficit ever, at $30.5 billion. As exports are pressured by foreign competition and a strong U.S. dollar, imports will rise, eclipsing $200 billion, driven mainly by purchases of foreign beef and pork.
Red Sea terrorism and the Ukraine conflict further complicate the shipping picture. Farmers’ declining fortunes will also hurt agricultural equipment sales. Over two-thirds of agricultural equipment dealers anticipate flat or declining revenue in 2024, though demand for used tractors, combines and more will likely hold up better.
Consumers can expect lower food price inflation. But how much lower? Food price inflation eased from nearly 10% in 2022 to a still-high 5.8% last year. But uncertainty endures. The Department of Agriculture’s midrange forecast is 2.9%, though officials could see the rate exceeding 5% in a worst-case scenario. Beef, eggs, and fats and oils are possible candidates for large upward price swings. Supermarket prices are now 25% higher than they were in January 2020.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Holiday Office Party Taxes: Know Before You Go
Tax Tips The IRS could tax your gifts from Christmas raffles, Secret Santa, and White Elephant. Here’s how.
By Kate Schubel Published
-
2025 Tax Reform: Will the SALT Deduction Cap Be Repealed?
Tax Deductions Some lawmakers say it’s time to end the $10,000 cap on state and local tax deductions.
By Kelley R. Taylor Published
-
Don't Sleep on Japan's Economic Transformation
The Letter After almost three lost decades, Japan — one of the world's biggest economies — is finally showing signs of life.
By Rodrigo Sermeño Published
-
Kiplinger Outlook: Telecom Companies Brace for Tough Times
The Letter The telecom industry is entering a new era that threatens profitability. But the coming Trump administration will make it easier for the major players to adjust.
By John Miley Published
-
Start-ups Trying to (Profitably) Solve the World’s Hardest Problems
The Letter More investors are interested in companies working on breakthrough science to tackle huge societal challenges. The field of deep tech has major tailwinds, too.
By John Miley Published
-
The Big Questions for AR’s Future
The Letter As Meta shows off a flashy AR prototype, Microsoft quietly stops supporting its own AR headset. The two companies highlight the promise and peril of AR.
By John Miley Published
-
China's Economy Faces Darkening Outlook
The Letter What the slowdown in China means for U.S. businesses.
By Rodrigo Sermeño Published
-
AI Start-ups Keep Scoring Huge Sums
The Kiplinger Letter Investors continue to make bigger bets on artificial intelligence start-ups, even for small teams with no revenue. Some backers think a startling tech breakthrough is near.
By John Miley Published
-
Should We Worry About the Slowing U.S. Economy
The Letter With the labor market cooling off and financial markets turning jittery, just how healthy is the economy right now?
By David Payne Published
-
New Phones Get All the Hype, but Consumers Still Love Old Models
The Letter Even as flashy artificial intelligence features drive sales of new smartphones, used phones continue to fetch big bucks as demand outstrips supply.
By John Miley Published