By: Miguel I. Moneta Porto, International Markets Advisor at CAADES
The economic situation of the agricultural activity in USA is going through difficult times Derivatives of the fall in the price of production observed in the last two years, largely due to the global oversupply of the main grainand with high costs of production.
The situation of the livestock producers It is not so critical because the price of the beef and poultry, eggs and of milk They have not been punished in the same proportion, although pork has and they are favored by the decrease in the value of the grain which is its basic input.
Overall, therefore, the fall in net income from agricultural production is attenuated by the results cattle breedersbut this does not diminish the effects of the crisis affecting the sector as a whole, whose net income adjusted for inflation, including government support, will decrease from 225 billion dollars in 2022 to 154 billion dollars in 2024, which represents a 32 percent decrease.
The US economy is currently showing signs of deceleration in his growth According to the latest reports from the Federal Reserve, this may result in lower consumption of certain foods and in relation to agricultural activity, it is confirmed that the sector’s income has decreased dramatically due to the fall in the price of the main products. grains such as corn, wheat and soybeans.
The new wheat harvest, which has just finished and is just beginning for corn and soybeans, is abundant despite some isolated weather problems, and the expected increase in inventories will contribute to prices remaining weak at historically low levels, as they are currently.
In addition, the interest rate has remained high in recent years in order to control inflation, which is resulting in financial stress for a large number of farmers due to the drop in net income, which has led to an increase in renewals, extensions and overdue loans in different regions of the country.
Due to falling farm incomes and profitability, land prices are falling, as is credit ratings, which may result in some producers, especially the smaller and more vulnerable ones, being forced to stop farming due to lack of profitability.
Another warning sign that the U.S. agricultural sector is in crisis is falling sales of farm machinery, which is laying off workers due to lack of demand.
All of the above indicates that the agricultural sector, especially the agricultural sector in the United States, is entering a recession, if it is not already, due to a decrease in income due to the drastic drop in sales while the price of inputs such as fuel, fertilizers and labor, among others, remains high.
If the agricultural industry in the United States, which has a robust system of government support perfected over many decades and a great deal of public technical support such as the Universities, is going through this crisis, there is a high probability that a good number of producers will be forced to abandon the activity, it makes us reflect that in the case of Mexico, where we are in an open economy competing with them, this would require a clear positioning of public policies for medium-sized producers on the part of the new Federal Government to allow our sector to overcome this very complicated situation.
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