The agricultural economic outlook for 2022 remains solid. Cortney Cowley is a senior economist with the Federal Reserve Bank of Kansas City. She says while things look good on the surface, there will be things to watch out for this year.
“Very strong conditions overall, but, on the other hand, a sharp increase in production costs is weighing on expectations for 2022,” Cowley says. “And so, on the surface, everything looks really good, very strong. There could be, you know, little drip and the agricultural economy in the form of input cost that can start adding pressure moving forward. And so, ag credit conditions are strong and have been supported by high commodity prices and strong demand for U.S. Ag products, both domestically and internationally.”
She says rural bankers are concerned about risks this year.
“Ag lenders do continue to express concerns related to higher input costs, weak loan demand, and severe drought in some portions of the country, so, adding just a little bit of that pressure to what has been one of the strongest periods for the ag sector in some time.”
Cowley calls the current agricultural outlook for 2022 a paradox.
“It’s very interesting to see the juxtaposition or paradox of really strong conditions but also concerns about inflation, higher input costs, so, farm balance sheets are strong. There’s a willingness to spend farm working capital but higher input costs are an issue. There’s a lack of things to buy, and so that’s been a constraint. Drought still seems to be a significant issue in a lot of parts of the country, both the north and western United States.”
Source: NAFB News Service