The U.S. economy will slow in the new year, constrained by sharply higher interest rates even as farmers and ranchers ramp up production, the Agriculture Department predicted on Monday. Prices for most commodities – including corn, soybeans, wheat and pork – would decline somewhat from this year’s high levels, but remain relatively high.
With normal weather and trendline yields, the corn and soybean crops would be the largest ever, following late summer drought in the Midwest and drought in the Plains that have reduced yields this year. Per capita meat consumption, currently 0.62 pounds per day, would increase annually over the next decade, reaching 0.65 pounds in 2032, according to the USDA’s long-term baseline. High retail meat prices haven’t dampened America’s appetite.
Lower commodity prices could weigh on farm incomes despite increased production; the USDA will make its first forecast of 2023 farm income in February. It projects net farm income to hit a record $147.7 billion this year, up from $140.4 billion in 2021.
The University of Missouri think tank FAPRI said in September it expects farm incomes to decline in 2023 and 2024 as commodity prices decline faster than input costs, which have soared. of $67 billion this year, the largest year-over-year increase on record.
After a growth rate of 3.1% this year, US economic growth is expected to be 2.7% in 2023 as the economy cools after its rapid recovery from the pandemic. Inflation would fall to 3.1%, oil prices would fall and the unemployment rate would remain low, but the bank’s prime rate would be 6.6%, up 1.9 points from this year. At 3.2%, global GDP would grow faster than the US economy and China, the largest customer of agricultural exports, would post growth of 5.3%, the USDA said.
However, the International Monetary Fund predicts global growth of 2.7% in 2023, compared to 3.2% this year. “Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades,” the IMF said in a quarterly outlook released last month. “The cost of living crisis, tighter financial conditions in most regions, Russia’s invasion of Ukraine and the ongoing Covid-19 pandemic are all weighing heavily on the outlook.”
Producers were expected to plant 92 million acres of corn next year – an increase of 3.4 million acres – while reducing soybean plantings to 87 million acres, down from 500,000 acres. Wheat plantings would increase to 47.5 million acres, an increase of 1.8 million acres. Upland cotton plantings would fall by nearly a third, to 9.5 million acres, affected by drought losses and low market prices this year. Plantings of the eight major US field crops, which also include rice, sorghum, barley and oats, would total 250.8 million acres, up 1.3 million acres from this year.
The corn crop was projected at a record 15.265 billion bushels, nearly 1.4 billion bushels higher than this year. The crop would average $5.70 a bushel on the farm, down from $6.80 this year, the USDA said. Soybean production of 4.480 billion bushels, also a record, would be 167 million bushels higher than this year. The season’s average price for soybeans was forecast at $13 a bushel, down $1 a bushel from this year. The highest farm gate price for corn was $6.89 per bushel for the 2012 crop and for soybeans it was $14.40 per bushel, also for the 2012 crop.
The USDA expects this year’s wheat crop to sell for a record $9 a bushel, buoyed by war in Ukraine, usually a major exporter. The season’s average price would drop to $8 a bushel for the new crop, still the second highest farmgate price. Producers were expected to plant 47.5 million acres of wheat this year, producing 1.919 billion bushels. The Upland cotton crop was projected at 13.9 million bales weighing 480 pounds, slightly more than this year. The season average cotton price of 80 cents a pound for the 2023 crop would be 10 cents lower than this year, but the best price for years to come, the USDA said.
Beef production is expected to fall 6.3% in 2023 amid a brief decline in cattle inventories that would boost market prices. Pork and chicken production is expected to increase slightly in 2023, while market prices for pigs and broiler chickens have fallen.
Selected tables from the USDA’s long-term agricultural projections were available here.