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Ag economy to remain strong in 2022 despite signs of softening on the horizon

An economist says the outlook for the ag industry remains strong this year but has signs of softening in 2023.

Nathan Kauffman with the Kansas City Federal Reserve Bank says the farm economy rebounded rapidly after a slowdown at the start of the pandemic. “Commodity prices are still high, profit margins are still there, lending conditions are still there, credit quality is strong, land values are at record highs – all of that is to say that when we compare conditions prior to the pandemic, financial stress is substantially less than what it was in 2019.”

But, he says, skyrocketing input costs and inflation could put a strain on available capital for next year. “Sometimes that can be because there are more opportunities and profits are strong, but other times it means that producers are in a place where they require more financial assistance.  If that is the case and we’re seeing conditions soften,  it’s worth keeping in mind that we could see some softening in profit margins going into 2023.”

Kauffman says drought has been supportive to commodity prices and that could have a significant influence on the markets heading into 2023.

He made his comments on a University of Nebraska-Lincoln webinar: “Post-pandemic economic forces shaping agriculture’s outlook.”