Both inflation and interest rates will slow in 2024, according to preliminary projections from the U.S. Department of Agriculture, while some crop prices are expected to fall.
The USDA puts out annual reports on economic conditions for the coming 10 years — that includes particularly important information for farmers and agriculture policy-makers.
In this year’s projections, the department said inflation will increase less than it did in the past year and interest rates will fall slightly. The USDA also projects some important Midwest crops like corn, soybeans and wheat will see lower prices.
Farmers watch USDA reports to make decisions about their businesses. Ryan Frieders, a corn and soybean farmer in northwest Illinois, said he looks the department's datasets determine his best opportunities "and also some things that I could maybe think about that might be potential hurdles,” he said.
In Frieders’ view, one potential obstacle will be the labor market. The USDA projects wages will increase over the next decade while the unemployment rate will increase slightly but remain relatively low.
“It looks to be a very competitive labor market coming at us for the next 10 years,” Frieders said. “So it'll be harder and harder for farmers to find that help that they need to get the work done on the farm.”
But there are also plenty of opportunities for farmers. In these new projections, Frieders sees a sign of hope: stability. The USDA is projecting decreasing, then stable interest rates and relatively stable energy costs, both of which are important for farmers, who take out regular operating loans and use a lot of fuel.
That stability is especially welcome after a highly variable past few years marked by the pandemic, inflation, war abroad and supply chain disruptions. Farmers also faced specific challenges, like increasing fuel prices and difficult access to fertilizer and seed.
“It made it harder to plan for everyday operation,” said Andrew Larson, director of government relations for the Illinois Soybean Association.
The last few years also stood out in other ways — 2022 was a record high year for agriculture commodity prices and was a record high year for American net farm income. In the coming years, the USDA is projecting a decrease in crop prices that is essentially a return to normal.
“We've been in a transition period the last couple of years where commodity prices have been higher than they normally are,” Frieders said. “I believe from the data, the USDA was predicting a more normalized price with fewer ups and downs in the commodity prices for the next few years.”
Lower commodity prices aren’t likely to translate into lower prices at the grocery — at least not immediately. It can take a while for lower crop prices to trickle down into lower consumer prices, especially when there is a lot of processing involved, said Bob Maltsbarger, a senior research economist with the Food and Agriculture Policy Research Institute at the University of Missouri. That’s because to get a product to store shelves, you have to add in costs for things like packaging, transportation and labor.
“Retailers will generally have prices be stickier, and you will see a delay or a lag between farm prices declining and store prices decline,” Maltsbarger said.
Still, Maltsbarger said if factors like weather are relatively normal this year, strong production could put pressure on commodity prices and push food inflation down.
The USDA is also predicting rising yields, or more productive crops, over the next decade for corn and soybeans, which Frieders found interesting.
“Overall, it looks like a good time to be in agriculture,” Frieders said.
Kate Grumke is a senior environmental reporter for St. Louis Public Radio. This story was produced in partnership with Harvest Public Media, a collaboration of public media newsrooms in the Midwest. It reports on food systems, agriculture and rural issues.
