(The Center Square) – Farmers are unlikely to enjoy a quiet year this year, according to agricultural economists at Purdue University.
After a year of grappling with historical inflation rates, farmers now need to be prepared for an economic downturn that could trigger a recession. But there’s more uncertainty on the horizon, said Roman Keeney, associate professor of economics at Purdue’s College of Agriculture.
That’s because the five-year federal law on agriculture expires in September, meaning a divided Congress must agree on a new spending and policy bill.
“After several years of emergency relief and agriculture benefiting from COVID relief packages, direct government support for agriculture will fall dramatically,” said Keeney, who also serves as associate editor of the Purdue Agricultural Economics Report. The report publishes its Outlook 2023 earlier this month.
Jayson Lusk, who heads Purdue’s Department of Agricultural Economics, noted that prices for many staple foods have risen significantly over the past year. For example, the price of eggs shot up 49.1% from November 2021 to November 2022.
This increase, which was about seven times higher than the overall inflation rate over the same period, was mainly due to bird flu, which reduced the number of egg-producing hens by more than 43 million, an 11% population decline.
According to Lusk, federal researchers expect food prices to increase by only about 4% in the coming year. However, he added that food prices have not been affected by the Federal Reserve’s rate hikes, which has helped cool inflation in other sectors.
He added that a potential recession could be bad news for farmers.
“According to our analysis, spending on fresh fruit and vegetables, and particularly restaurant food and alcoholic beverages, would likely suffer the most if consumer incomes fell,” Lusk wrote in his article. “While predicting individual food prices is always a risky business, we will likely see higher beef prices in the years to come if current cuts in breeding herds ultimately impact fed cattle herds.”
The report also predicts that Indiana farmland prices will continue to rise even after the state set price records last year. Prime farmland in Indiana was valued at more than $12,800 an acre last year, while average land commanded a price of nearly $10,600 an acre.
“Growth in farmland prices throughout the Corn Belt is being supported by higher commodity prices, increased demand for non-agricultural conversion, and the overall strength of the agricultural economy,” wrote Todd Kuethe, associate professor of farmland economics at Purdue. “However, the potential for growth may be limited by fears of a reversal of any of these factors, as well as rising costs of agricultural production. Additionally, upward pressure on farm mortgage rates is exerting downward pressure on transaction prices.”