Farm Credit East Knowledge Exchange Industry Snapshots

Volume 18, Issue 9
September 2024

The National Economy

As of mid-2024, the economic outlook for the United States presents a mixed but cautiously optimistic picture, with GDP growth projected to stabilize around 2-2.5% annually. Unemployment rates have declined to pre-pandemic levels, hovering around 3.5-4.5%, driven by continued job creation across various sectors, particularly in technology, healthcare, and green energy.

Inflation remains a concern, though it has shown signs of moderating. The Federal Reserve's monetary tightening, including interest rate hikes, aims to curb inflation, which had surged to multi-decade highs.

CPI inflation moderated in July to 2.9%, year-over-year, potentially increasing the likelihood of an interest rate cut this fall, should the trend continue.

Consumer spending remains strong, buoyed by a resilient labor market and rising wages, although higher borrowing costs might dampen this momentum.

The housing market faces challenges with elevated mortgage rates affecting affordability, but demand remains strong due to demographic trends and limited housing supply. Corporate investment is expected to grow, particularly in technology and infrastructure, fueled by federal spending initiatives.

Global factors, such as geopolitical tensions and supply chain disruptions, pose risks to the outlook. Trade relationships and international economic conditions will significantly influence the U.S. economy. 

Net Farm Income Projection

Dairy Industry Snapshot

• HPAI has been confirmed in dairy cattle in multiple US states, with 5 states affected in the last 30 days (Colorado, Idaho, Michigan, South Dakota and Texas as of August 29). There are, as of publication, no known cases in the Northeast. 
• While wild migratory birds are believed to be the initial source of infection in Texas, subsequent infections now appear to be linked to cow-to-cow spread, movement of infected cattle and indirect transmission due to human and equipment vectors. 

• Initial testing has not found changes to the virus that would make it more transmissible to humans. While cases among humans in direct contact with infected animals are possible, this indicates that the current risk to the public remains low. Human infection has been rare, however, farmworkers and service providers should exercise caution among sick or dead birds and infected animals. This includes wearing PPE and disinfecting following exposure. There have now been a total of 4 known human infections, all in persons with prolonged close contact with cattle, and all cases have been fairly mild.

Preventing the Spread:

• Farmers should exercise increased biosecurity protocols, including any farm visitors or service providers. This may include using disposable booties, gloves, and possibly additional PPE depending on level of contact with animals. 

• USDA is encouraging producers and veterinarians to minimize dairy cattle movement. At this time, they expect that minimizing movement, upholding good biosecurity practices, and testing animals before necessary movements will limit disease spread sufficiently to avoid the need for regulatory restrictions or quarantines. Unlike in poultry flocks where HPAI is fatal, among the dairies whose herds are exhibiting symptoms, the affected animals have recovered with little to no associated mortality reported.
• At this stage, USDA does not anticipate the need to depopulate dairy herds if infections are found. Unlike HPAI in birds which is typically fatal, little to no mortality has been reported and the animals are reportedly recovering. The affected cows on the dairy farms are currently being isolated from other animals. Transparency and collaboration with and by dairy producers will be important to mitigate broader potential impacts to the industry.
• Federal regulations now require testing of lactating dairy cattle prior to interstate movement. Positive tests of HPAI must be reported. 

• Because milk and dairy products are pasteurized before entering the market, there is no concern about the safety of the commercial milk supply, or that this circumstance poses a risk to consumer health. Testing has shown that the H5N1 virus is easily killed via commercial pasteurization.
• USDA is also confident that the beef and veal supply is safe. As always, USDA encourages consumers to properly handle raw meats and to cook to a safe internal temperature. Cooking to a safe internal temperature kills bacteria and viruses, like influenza, in meat.
• Despite the safety of the food supply, there is some concern regarding consumer reactions and whether this may affect demand for dairy products. 

• The national milk cow herd has fluctuated in size a bit but remains below last year’s average. The national milk cow herd was at 9.325 million head in July, down slightly from the prior month, and below the 2023 average of 9.386 million head. Milk production per cow was flat from the prior year. 
• New York was flat in terms of cow numbers from this time last year, and production per cow was off slightly, resulting in a decline in milk production of -0.2%. Nationally, states with declines outnumbered states with gains. California (-0.3%), Idaho (-1.0%), Michigan (-0.9%), New Mexico (-8.9%), Pennsylvania (-0.2%), Vermont (-3.7%), and Wisconsin (-0.1%) showed declines, while some smaller states showed modest increases.
• Feed and fuel costs have declined over the last year, but other input costs have risen. Meanwhile, milk prices have also increased, but only modestly. Income-over-feed cost calculations, such as the DMC margin, look much better than last year, but overall producer margins remain tight due to increases in non-feed costs. 
  
   

Cash Field Industry Snapshot

USDA Crop Forecast

Source: USDA WASDE

USDA Crop Condition - 18 survey states

Source: USDA WASDE

• Prices for grains and oilseeds have declined significantly since the 2022/23 crop year. 
• September 2024 corn futures are trading at $3.71/bu, and August soybean futures at $9.41/bu as of August 23.⁴   
• Overall growing conditions have been good in the Northeast, although some areas have reported moderate drought recently.
• Farmers nationwide including in the Northeast, have a lot of grain in storage. Many are now having to sell into a down market to make room for the 2024 crop.

Livestock Industry Snapshot

• USDA forecasts continued price increases for choice steers with 2024 average prices at $188.11/cwt.  Cattle and beef prices are likely to remain elevated for at least another 18-24 months due to low herd sizes. 
• Broiler prices are forecast up slightly at $1.29 in 2024. Egg prices are forecast to average $2.71/doz in 2024, a significant increase from 2023.⁵ 
• Strong demand continues to support high prices for meats, but supply will limit volume and elevated input costs will limit producer profits.
• The recreational horse industry in the Northeast is presently experiencing opposing cross currents, benefiting from continued robust demand while struggling with persistently elevated input costs and a tight labor market. As a result, most stables are full, but many owners continue to experience low margins in their boarding operations, even after price increases. With input prices cooling, and good early results for 2024 hay, farm owners should see some relief in margins in the second half of the year. Demand for stabling will likely remain strong, especially given recent private equity investments in competition venues in the lower Hudson Valley – it appears that this area is solidifying its position as a singular summer hub for upper-level riders in showjumping and dressage, where previously these participants had been geographically dispersed outside of the Florida winter circuits.
  
   

Additional Industry Snapshots:

Fruit

Timber and Forest Products

Vegetable/Potatoes

Aquatic/Fishing

Greenhouse, Nursery and Sod

¹ Agri-Mark Price Forecast

² Upstate Niagara Price Forecast

³ USDA World Agricultural Supply and Demand Estimate (WASDE)

⁴ CBOT Futures

⁵ USDA WASDE

Editor: Chris Laughton
Contributors: Chris Laughton

View previous editions of the KEP

Farm Credit East Disclaimer: The information provided in this communication/newsletter is not intended to be investment, tax, or legal advice and should not be relied upon by recipients for such purposes. Farm Credit East does not make any representation or warranty regarding the content, and disclaims any responsibility for the information, materials, third-party opinions, and data included in this report. In no event will Farm Credit East be liable for any decision made or actions taken by any person or persons relying on the information contained in this report.

Tags: ag economy, outlook, aquatic, cash field, dairy, fruit, lumber, nursery, vegetable