More than 50% of ag economists now think the US ag economy is already in a recession

U.S. corn prices fell to a four-year low as prospects for the 2024 corn and soybean crops showed record field crops. The itchy vision appeared in August as well Ag Economists’ Monthly Monitor Many economists worry that U.S. agriculture is already in a recession or on the verge of one.

„When you see, compared to last month or last year, we said for both, 2024, some of the most pessimistic readings we’ve had since we’ve done the research here,” Rural Interim Director Scott Brown said. And the Farm Finance Policy Analysis Center (RaFF), University of Missouri helps write the monthly monitor each month.

The latest Ag Economists’ Monthly Monitor attempted to better gauge the risk of financial stress in agriculture, asking more than 70 economists whether agriculture is on the brink of recession. Almost 60% said “yes”.

„Maybe I still wondered, 'Are we already in a recession?’ More than 50% said 'yes, we’re already in a recession’, which is a big change from where we were 16 to 24 months ago, and it shows a lot of people are concerned about where we sit today.

The monthly monitor asked economists to provide further explanation as to why they think the US economy is already in recession. Economists say:

• „For at least most crop producers, the sharp decline in prices and cash flows has resulted in lower net income and financial pressure on foreign producers. As prices for some commodities (cattle, milk) rise and feed costs decline, the picture is generally grim on the animal agriculture side of the ledger.
• „I think the U.S. economy is in a recession. The projections for farm incomes in real dollars in 2023 and 2024 are the two biggest declines in history. Costs are higher than prices for most commodities. And the outlook doesn’t give any indication of improvement anytime soon.
• “Farm income has gone down. Ag manufacturers are laying off people. Suppliers to those manufacturers are laying off people. What are the bright spots? Livestock, depending on category? Trade with Mexico? After that, the list gets pretty thin.
• „We’re not at one yet, but we’re on the verge of one.”
• I think we will enter recession after the election.

Livestock contributes to the overall economic picture

As concerns about the ag economy mount, Brown points out that the net farm income situation could be even worse if there aren’t more favorable prices for livestock.

„I think cattle prices have helped push that up. At the same time, we’re seeing corn and soybean prices continue to decline,” Brown says. „We know that crop receipts will be lower than they said at the beginning of the year, cattle will probably be higher, hogs will probably be higher and dairy products will be higher. But economists also expect production costs in the first part of the year not to rise from where they were originally.

Net farm income may decline further

The US Department of Agriculture’s (USDA) Economic Research Service (ERS) released its first look at 2024 net farm income in February. Farm Sector Income & Finance: Farm Sector Income Forecast. At the time, the USDA ERS forecast showed that net farm income would decline after reaching a record peak in 2022.

Forecasts from the USDA ERS showed:

· Net farm income, a broad measure of profitability, reached $185.5 billion in nominal dollars in calendar year 2022.

· A decline of $29.7 billion (16.0%) from 2022 to $155.9 billion in 2023 Net farm income is projected to decline by $39.8 billion (25.5%) to $116.1 billion in 2024 from 2023..

· Net cash farm income to reach $202.3 billion in 2022. A decrease of $41.8 billion (20.7%) from 2022 to $160.4 billion in 2023.

ERS will issue an updated 2024 forecast in September. Even with the improvement in livestock margins, most economists expect the August Ag Economists’ Monthly Monitor that further declines in crop prices will weigh on overall net farm income and force the agency to revise down their forecast.

· Nearly 57% expect the USDA to revise its forecast

· 36% think the correction will be less than 5% to 10%

7% think the USDA will leave its forecast unchanged from February.

What will affect crop prices in the next 6 months?

August’s monitor asked economists to outline what crop prices would look like over the next six months. Economists say:

• Growing crop size and limited export
• Bioenergy and feed requirement
• Weather and crop size in South America, especially second crop final production numbers and first crop plantings
• New Tariffs and Potential for Relations with China
• Fertilizer price and impact on 2025 acres.

What will affect cattle prices in the next 6 months?

With an even more bullish outlook for livestock, the August survey asked economists what they expected livestock prices to be in the next six months.

• weak demand
• Maize prices are low
• Tight cattle numbers are possible

„I think the supply fundamentals have been basically unchanged since this spring. The big question needs to be asked. If there is an economy-wide recession, what will happen to beef demand,” one economist responded in an anonymous monthly survey.

What to see

From geopolitics to the evolving situation in supply and demand in all commodities, the monthly survey asked economists to outline the factors that have not been adequately covered in the media.

• „Decline in cash flow.”
• „The Growing Gap Between Crop and Livestock Producers.”
• „The Impact of the Trump vs. Harris Win and Misconceptions About Who’s Better for the Farm Economy.”
• „Continued high prices for many ag inputs.”
• „I’m disappointed that American farmers continue to push to be more sustainable. I’m also concerned that producing in a less sustainable way will lead to vertical integration in crop agriculture.
• „The Catastrophic Risk of Rate Hikes.”
• „Will Congress start supporting farm income at these levels? ARC/PLC is ineffective at this point. Temporary costs are high.”
• „Inflation.”
• „Possible government farm program money this fall (last year’s crop year).”
• „Financial Manager Application of Algo Computers.”

Your next read: The ugly truth: 2023 and 2024 will see two major declines in net farm income.