Markets Attempt to Edge Back to Normalcy

It has been a wild ride for the U.S. and global economies since COVID-19 struck. Inflation and war in Europe have not helped matters. We asked Roger Cryan, chief economist for the American Farm Bureau, to weigh in on how recent events could affect agriculture.

Farm Bureau
Roger Cryan, Chief Economist for the American Farm Bureau

There has been some easing on pricing for inputs and fuel. Do you expect that to continue?

CRYAN: I hope so. The cure for high prices is high prices. That’s clearly working in the fuel market. It may be a little trickier in the nitrogen fertilizer market because European fertilizer factories can’t justify producing with the extremely high natural gas prices there now. But eventually, the market will solve this.

Early on with the war in Ukraine, there were some dire predictions about global food supply. Where does that stand now as the war continues?

CRYAN: Crop prices are still relatively high, compared to recent years, but they have come down quite a bit from the war spike. This year should be a wake-up call. We can’t put all the world’s problems on the backs of farmers. Farmers can contribute to climate solutions, but is it really sustainable if there’s not enough food to feed the world? Farmers are always working on ways to farm better, but we shouldn’t be encouraging (or making) them farm less. Our members have made farming look easy for the last 40 years, but farming is not easy.

What are you hearing about availability of products farmers need to produce a crop?

CRYAN: In the United States, the biggest availability challenge is around federal regulations for crop protectants. Farm Bureau faces regular challenges in getting the government to provide a more predictable and balanced approach to regulating these important tools for making farming productive and sustainable. Otherwise, where markets have the chance to work, and as long as we don’t have new international crises, supply-chain issues are gradually working themselves out. It is still a good idea to have a good relationship with your equipment dealer. The prices for a lot of farm supplies are still high, but we seem to be moving back to normal, whatever that is anymore.

As the Federal Reserve wrangles with inflation, what impact do rising interest rates have on U.S. farmers?

CRYAN: Our current bout with inflation is very unfortunate. COVID-19 caused a recession in 2020 by interfering with supply. The Fed went hog-wild with monetary demand stimulus. That clogged up supply chains and created so much new money that inflation became inevitable. I see inflation continuing through 2023 in the 5% to 9% range, even with the Fed raising interest rates.

The Fed’s interest rate had been near zero for much of the last decade. That’s been a boon for borrowers. Raising the rate to 3% or so now will increase the cost of operating loans for a year or two. However, reining in inflation is critical to keeping long-term interest rates down, so that farmers can make the long-term investments they need to help meet a growing global demand. We should all welcome a return to a boring monetary policy.

Anything else you would like to add?

CRYAN: Our members are #stillfarming, as we say so often. But every year there are fewer farmers feeding more people. We are lucky to live and farm in a country that trusts and supports farmers, but there is always more to do to build on that trust, and Farm Bureau and its members do that every day.