By Mary Hightower
The economic clouds from 2024 are expected to persist into 2025 as progress toward a new Farm Bill stagnated, commodity prices lagged and profit margins for farmers remained razor thin at year’s end.
2024 also saw Arkansas farmers contending with drought, remnants of hurricanes Francine and Helene, and a squeeze at the elevators as the Mississippi River shrank for the third straight year, with levels at Memphis sinking to near-record lows.
Farm Bill
Progress on the next Farm Bill was mired during the 2024 presidential election cycle and the announced retirement of Senate ag committee Chair Debbie Stabenow. The drumbeat for revised reference prices to trigger safety nets became increasingly loud during the year as farmers struggled with low commodity prices and lowered, but still high, input costs. Attempts at the end of the year to come to agreement on an aid package to farmers fell apart in early December.
“The good news is that the lame duck session has not left farm country out of discussions,” said Hunter Biram, extension economist for the Division of Agriculture. “In fact, it is very likely that the 2018 farm bill will once again see another extension. Even if that happens, farmers will not have the safety net they will need for 2024 and 2025.”
Low Mississippi
Persistent drought in the upper Mississippi and Ohio rivers starved the lower Mississippi of water, prompting the U.S. Coast Guard to implement draft restrictions — just in time for harvest. Draft restrictions meant less grain could travel in each barge, raising shipping costs. Draft restrictions on the lower Mississippi were lifted in late November after several rounds of rain.
“In the early weeks of harvest, basis was under pressure from the shipping challenges on the Mississippi,” said Scott Stiles, extension economics program associate for the University of Arkansas System Division of Agriculture. “Fortunately, basis didn’t worsen throughout harvest."
“Basis levels for both corn and soybeans began to strengthen in mid-September and continued to improve into late October,” he said. “Soybean and corn shipments are running ahead of last year. Corn shipments out of New Orleans are running about 41 percent ahead of last year. Soybean shipments are 27 percent ahead of last year. This could be due to better traffic flow through the Panama Canal.
“Overall, export demand is running ahead of last year's pace for both corn and soybeans,” Stiles said. “So far in the 2024/25 marketing year, roughly 56 to 57 percent of corn and soybean exports have been shipped out of New Orleans.”
Stiles said “the Mississippi River gauge is something we continue to watch as the U.S. is in its critical grain export window."
River levels at Memphis are expected to again drop below the ‘low threshold’ by Dec. 10.”
Big yields, low prices
By and large, Arkansas farmers enjoyed a stellar growing year. A warm dry spring, timely mid-season rains and a warm, dry fall meant early planting, few pest issues and a quick harvest. According to the National Agricultural Statistics Service November “Crop Report,” Arkansas soybeans were on track for a record state average yield with corn and rice shaping up to see their second-best average yields ever.
“We’ve seen some softening in input costs as we progressed through the year. Fertilizer, particularly nitrogen, and diesel are two examples of key inputs that have trended lower. Urea and urea ammonium nitrate are both 12 percent lower today than a year ago,” Stiles said. “NY Mercantile Exchange diesel futures are 16 percent below last year.”
However, not all fertilizers were lower.
“Phosphates have increased about 6 percent over the past year. And, in many cases growers lock-in some input costs ahead of planting. Seed is oftentimes booked months in advance of planting. Labor costs for programs like H-2A increased by 6 percent in Arkansas for 2024,” Stiles said.
“The decline in crop prices for the most part has outpaced the declines in some inputs,” he said. “Compared to a year ago, rice prices have fallen by 11 percent and cotton by 15 percent . Corn prices have recovered some lately, but as harvest was getting underway, corn prices were 23 percent below last year. Soybean prices have experienced the largest decline and remain 24 percent below year ago levels.”
The gloom was reflected in the enterprise budgets published by the Division of Agriculture in November.
“There isn’t a single budget which produces a positive net return when taking in to account all costs associated with production,” said Breana Watkins, extension economist who assembles the budgeting tool, said. “In previous years negative net returns were only realized on budgets where land rent was taken into account.”
If there was a ray of sunshine for farmers, it was that nitrogen fertilizers “trended lower all of 2024,” Stiles said, with urea and potash down 13 percent and 12 percent respectively, in November. However, diammonium phosphate and triple phosphates were up 7 percent from a year earlier.
Effects of the low commodity prices were rippling into other arenas such as the next Farm Bill and an increasingly nervous ag lending situation.
“Ag lenders fear the current farm economy, without ad hoc support, will force some operations to liquidate at the end of 2024,” Stiles said.
Tariffs and trade
The agriculture community was watching closely as president-elect Donald Trump threatened tariffs for China and other trade partners. China is the largest market for American soybeans, with a 55 percent export share in the 2024/25 season.
“We’ve seen prices for all the major crops turn sharply lower this year,” Stiles said. “Fresh tariffs could add more downside risks.
In 2018, in response to US tariffs, “we saw China’s soybean imports from the U.S. fall 61 percent year to year,” he said. “This also led to a 20 percent drop in soybean prices from April to September 2018.”
Interest rates
In September the Federal Open Market Committee announced its first interest rate cut in four years and followed with another quarter point cut in November.
Federal Research Chairman Jerome Powell said in September that the cut reflected a growing confidence that inflation was moving toward its goal of 2 percent. At a forum in December, he said the economy was “stronger than we thought it was going to be in September.”
In early December, various news outlets speculated that Powell might again cut the rate again when the committee met Dec. 17-18.
“Since the Fed’s interest rate cuts in September and November, economic activity has expanded at a good pace,” said Ryan Loy, extension economist for the Division of Agriculture.
“Since the rate cut in September, the Personal Consumption Expenditure, or PCE, is up 2.3 percent in October, up from 2.1percent in September,” he said. “The PCE, the Fed’s favorite measure of inflation, has been hovering around the target of 2 percent but has yet to fully stabilize at 2 percent.”
Since the cuts, the unemployment rate increased slightly to 4.2 percent.
“Even with a slight increase in the unemployment rate, the Fed believes it is on track to reach its target of maximum employment,” Loy said. “Overall, the data currently available shows that the Fed would be likely to cut rates again in December if data continues on this trajectory.”
To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on X and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu. Follow on X at @ArkAgResearch.
Source : uada.edu