8 Factors Shaping the Rural Economy in 2024
CoBank has released their 2024 outlook report, which takes a look at the key themes the organization expects to shape agricultural and the rural economy in the coming year.
Director of CoBank’s Knowledge Exchange Rob Fox shares that while the U.S. economy is still in good shape overall, high prices are expected to continue to take a toll.
Here are the top eight factors to watch in 2024.
1. Global Slowdown
Global growth in 2023 is estimated at 2.5%, which is less than half of the average growth between 2000 to 2018. This trend is expected to continue into next year.
CoBank recommends accounting for permanently slower global economic growth in your business plan moving forward.
2. Prices Remain Elevated
While inflation and the unemployment rate are down, higher prices appear to be sticking.
According to the report, the price of food at home has risen by 25% in the past three years and has affected consumer shopping behavior as a result. Retail spending has fallen in all but two months through the past year – which is expected to continue.
“Consumers are increasingly feeling the pinch of higher prices for food, housing and other essential goods. People have anchored mental expectations about what prices should be and those anchors take a long time to move,” Fox says. “Consumers are beginning to realize some prices aren’t going back to where they were three years ago and changing their purchasing behaviors to reduce spending. That will create stronger headwinds for the U.S. economy in 2024.”
3. Slowed Government Progress Continues
With slim majorities in both the House and Senate, shutdown deadlines continue to loom. Little progress has been made on major legislation such as the Farm Bill.
While CoBank shares the work already put into the Farm Bill could incentivize committees to pass it before 2025, the election of a new Senate Chair and the inexperience of many members of Congress may limit progress.
4. Lower Profitability Resulting From Several Factors
Commodity prices have seen the effect on high interest rates, a strong U.S. dollar and the resiliency of the U.S. economy. And despite the drop in fertilizer prices, the cost of production for agriculture commodities remains high.
CoBank is anticipating ag commodities to benefit from more upside price risk than down in 2024 due to tight inventories and a strong El Nino weather pattern during the growing season.
5. An Increase of Planted Soybean Acres
An expansion of soybean acreage is expected for two reasons: 2023’s smaller soybean harvest in the U.S. and an increase in biofuel demand.
USDA’s early release of its Agricultural Projections to 2033 points to planted soybean acreage rising 4% YoY to 87 million acres this spring.
Current 2024 futures prices suggest a decline in prices for the sector, but the outlook relies heavily on the value of the U.S. dollar, conditions of wheat in Russia and South America’s corn and soybean harvests.
6. Livestock Growth Plans Put On Hold
Lower feed costs and domestic demand should help profitability a bit in the livestock sector, but costs are still high. CoBank expects the industry to focus heavily on efficiency, technology and risk management.
7. Uncertainty In The Dairy Industry
Increased prices for consumers could keep sales growth at a slow rate, though they’re still expected to grow. International demand will play a large role in profitability and lower feed costs paired with improved cow productivity should increase milk production to meet the need.
8. Power, Energy And Broadband Sectors Face Obstacles
Global conflicts create uncertainty for commodity markets and energy prices. While oil prices have fallen by 5% in the fourth quarter, CoBank does not anticipate this environment to last.
As for broadband, investment continues to flow into the industry. However, it will not be without challenges due to a tight labor market, tight credit conditions and a difficult permit process.
Click here to read CoBank's full report.
