MACROECONOMIC FACTORS
5. Farm Inputs
The broad measure of farm input prices for 2023 remains largely unchanged from 2022. While fertilizer prices fell 14.1 percent in 2023, these declines were mostly offset by increases in other inputs, namely labor and interest costs. This trend is expected to continue into 2024, with minimal increases in total cost compared to prior years.
SELECTED FARM INPUT PRICE TRENDS
(in thousands, 2017)
Source: USDA, ERS data
2024 OUTLOOK
The overall Producer Price Index for production items, interest, property taxes, and wages (PPITW) is projected to increase approximately three percent in 2023 and 1.5 percent in 2024, in contrast to the 15.5 percent increase seen in 2022.
MACROECONOMIC FACTORS
6. Farm Bill
The expiration of the 2018 farm bill on September 30, 2023, prompted ongoing hearings by the Senate and House Ag Committees, yet progress toward securing the next farm bill remains limited. While the one-year extension passed back in November 2023 gives lawmakers more time to finalize the next bill, they remain largely divided on three key issues.
Reference Prices
Recent years have seen historically high commodity prices, surpassing reference prices, leading to a decline in ARC and PLC Payments since the pandemic. Delayed renewal and unchanged reference prices may further decrease commodity program payments.
Supplemental Nutrition Assistance Program (SNAP)
The Nutrition title is typically the most divisive title when it comes to passing the farm bill. The Republican side of the committee often scrutinizes the title and attempts to reallocate funds to other titles, given the zero-base nature of the farm bill budget. In contrast, Democrats tend to push for improvements and expansion of these programs. In October 2021, the Thrifty Food Plan (TFP), the basis for calculating maximum benefits under SNAP, was revised to accommodate for higher food costs facilitated by the pandemic. This plan may be revisited to accommodate higher food costs from inflation.
Conservation
The Conservation title has also been hotly contested. Over the next five years, the Inflation Reduction Act (IRA) granted an additional $19.5 billion to various conservation programs under the USDA’s Natural Resources Conservation Services (NRCS). Republicans on the Senate Ag Committee are pushing for this funding to be permanently rolled into the Conservation title to increase the baseline of the farm bill.
2024 OUTLOOK
Lawmakers are confident that the next farm bill will be finalized before the one-year extension through September 30, 2024, expires. Some hope to see the bill completed by the summer but suggested the ongoing uncertainty about the length of the fiscal 2024 appropriations process could affect the schedule.
MACROECONOMIC FACTORS
7. Agricultural Trade
The widening agricultural trade deficit will continue to garner attention as global competition challenges American farmers. Several more factors are speculated to contribute to the deficit, including the prediction that Chinese demand for U.S. agricultural exports will decline over the next decade. Weather will also be a factor, as ongoing hot and dry weather patterns in key soybean-producing regions of Brazil threaten to impact global soybean production.
The USDA projects a substantial negative agricultural trade balance of $30.5 billion for fiscal year 2024, marking the largest trade imbalance in nominal terms since 1935.
Trade Policy Opportunities
Even so, the USDA has tallied numerous trade policy wins that are expected to provide new trade opportunities for U.S. farmers and ranchers.
Agribusiness Trade Missions
The USDA plans to prioritize broadening trade opportunities for U.S. farmers through agribusiness trade missions to the following markets in 2024:
- Seoul, Korea – Week of March 25, 2024
- New Delhi, India – Week of April 22, 2024
- Vancouver, Canada – Week of June 17, 2024
- Bogota, Colombia – Week of July 29, 2024
- Hanoi and Ho Chi Minh City, Vietnam (with buyers from Thailand) – Week of September 9, 2024
- Casablanca, Morocco (with buyers from Senegal and Francophone West Africa) – Week of December 2, 2024
More information on 2024 agribusiness trade initiatives can be found at www.fas.usda.gov.
“Market diversification is an important tool for maximizing growth opportunities for U.S. agriculture, as well as hedging the risk of market contraction and general volatility in the global marketplace.”
TOM VILSACK, U.S. SECRETARY OF AGRICULTURE
2024 OUTLOOK
The U.S. has long recorded a positive agricultural trade balance, but this is no longer expected in the decade ahead. However, when the Fed starts cutting rates later in 2024, the value of the dollar will fall and make U.S. commodities cheaper to importing nations. This, combined with the focus on diversifying trade partners, could strengthen U.S. ag exports in the years to come.
MACROECONOMIC FACTORS
8. Technology
The landscape of technological innovation in the U.S. agricultural sector is undergoing a transformative shift. Despite advancements in automated harvesting technology, the fruit and vegetable industry remains labor-intensive, with approximately two million workers needed annually to handle various tasks across the 4.4 million acres of production.
The integration of generative artificial intelligence (AI) is anticipated to play a pivotal role. This technology is predicted to automate around 25 percent of labor tasks in advanced economies and 10 to 20 percent in emerging economies by 2034.
Over a quarter of U.S. farmers already employ precision agriculture technologies, but concerns about data confidentiality, cybersecurity, and broadband accessibility persist.
AI and Agriculture
In agriculture, AI holds the potential to enhance productivity through precision farming technologies such as GPS steering, yield monitoring, and robotic milking. The application of AI extends beyond precision farming to areas like fertilizer application, pest management, yield forecasts, and irrigation, offering potential cost-saving measures ranging from five to 15 percent for farmers. However, data security is a paramount concern, particularly as AI relies on transferring data from farm fields to the cloud, as the need for secure digital networks to protect sensitive agricultural data grows. Accessibility is also an ongoing concern, with the USDA reporting that more than 22 percent of rural communities still lack reliable broadband access.
2024 OUTLOOK
As policymakers deliberate on AI's role in agriculture, considerations include cybersecurity, internet accessibility, the affordability of technology for small farms, and data confidentiality. The potential benefits of AI in agriculture are clear, yet balancing innovation with appropriate safeguards remains a key challenge for sustainable and secure technological advancement in the sector.