In a pessimistic outlook for the 2023 farm economy, CoBank analysts say the upcoming year will be shaped by political gridlock in Washington and a mild recession.
Several of the bank’s analysts contributed to a year-ahead report that details expectations for the impacts of the financial system on rural America, including “break-even at best” conditions for crop production. Dan Kowalski, vice president of CoBank’s Knowledge Exchange, said they expect softening in the U.S. economy through the first half of 2023, “ushering in a brief, modest recession.”
“The unemployment rate could rise as high as 5%, indirectly leading to a decline in consumer spending,” he said. “Without this softening in the labor market and the associated slowing of wage gains and spending, it will be difficult to stabilize prices.”
Crop production margins are expected to tighten amid “a slowing economy, rising interest rates, high labor and energy costs (namely diesel fuel), and trade uncertainty with China and Mexico,” the report says.
CoBank’s livestock outlook says a “broad-based era of profitability will likely come to an end in 2023” due to high input costs. The report sees “flat at best” per capita meat and poultry consumption and consumers “reeling from rapidly declining real wages.”
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Dairy supplies are expected to incrementally grow, and “dairy product prices will moderate in response to a slow but steady growth in global milk supplies in the face of a sharply slowing global economy."
CoBank says specialty crop producers face several headwinds, ranging from water issues to American consumers looking to cut their food bills. For shoppers, the "relatively pricey fresh fruit and vegetable aisle is a likely place to start" reducing grocery bills, the report says.
“California in particular faces worsening conditions with the trifecta of the highest diesel prices and farm wages in the U.S. amidst a worsening drought,” the report asserts. “The drought has lifted the price of water to record highs as La Nina conditions persist into a third straight year in 2023.”
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