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vistacomm 11/02/2021 No Comments

Seven Factors Influencing The U.S. Farm Economy In 2022.

It’s no secret that the economy is fluctuating every day. However, it is important to know how these fluctuations are influencing the U.S. farm industry in 2022. According to AgAmerica.com, below are some economic impacts the ag industry is experiencing in 2022.
  1. Supply Chain Shortages

The biggest contributor to inflation and spiking farm production costs is supply chain shortages. Even though this issue is not in your control, you can control your response by having a plan. These shortages impact access to fertilizer applications, farm machinery parts, livestock feed, labor, and transportation.
  1. Inflation

It is important to understand how to minimize production costs because of inflation. Commodity prices remain elevated, higher costs will demand a greater amount of working capital.
  1. Interest Rates

Interest rates accounted for nearly 6% of total cash farm expenses in 2021. Even just a 1% increase can be significant when factoring in money borrowed for operating capital, production investments, and farmland acquisition. With interest rates on the rise, if you’re securing financing look into getting a fixed interest rate, if possible.
  1. Severe Weather

From drought to severe weather, farmers respond to weather events impacting their operation’s success. Disaster relief funding, ag research, and technological innovation will all play an important role in protecting farmers and ranchers from an increasing number of severe weather events. The best response is to be prepared and make efficient use of resources.
  1. Federal Spending

After record government spending in 2020, direct government payments are expected to further decline in 2022. Direct government payments went from a record high of nearly $46 billion in 2020 to a projected low of less than $12 billion in 2022. Furthermore, there has been a great deal of focus on the 2023 Farm Bill which will largely determine the future of federally supported programs and ad hoc payments.
  1. Legislation

Legislation to keep an eye on in 2022 includes the Infrastructure Investment and Jobs Act, a la carte legislation from what’s left of the Build Back Better Plan, and as mentioned, the 2023 Farm Bill. With uncertainty, more farmers and industry groups are stepping up to ensure the voice of agriculture is heard throughout legislative discussions.
  1. Trade

Discussion surrounding global trade is expected to continue into 2022. Strong economic growth is expected for major importers of U.S. ag products, leading to record-breaking ag export trade forecasts for the fiscal year 2021 and 2022. A diverse number of free trade agreements can support the competitive edge of U.S. agriculture in the global market.