Fall harvest season is also growing pessimism about what is ahead. And it is not because of anything that the producers are doing. It is all because of economic concerns. There are a variety of challenges for the agricultural sector and that is cutting positive feelings about the immediate future.
Less than a year ago, Americans still had a sizable portion of their excess savings built up during the COVID-19 pandemic. Americans held onto about 75% of their $1.7 trillion, give or take a few billion here and there. And it wasn’t just the rich who got richer. All income levels retained significant savings reserves. In fact, the lowest quintile earners still had more than half of their pandemic-related savings. However, those savings disappeared over the past year.
A survey from the Fed shows that only the wealthiest 20% of the country has greater savings (8%) compared to when COVID attacked the country. The remaining 80% have gone backwards over that period.
So where does that leave producers? Anxious. Inflation last year was more than four times higher than the previous decade’s annualized increase of 1.88%. Inflation has cooled this year. But the rate for the 12 months that ended in August rose half a point from the month before to reach 3.7%. Hence, a major factor in the pessimism in agriculture.
Shrunken savings, continued inflationary pressures, lower commodity prices and high interest rates all add up to less positive feelings about the future, according to the 60 economists who contribute insights into the Ag Economists’ Monthly Monitor. (Beef cattle and soybeans score the highest financial rankings in the survey with hogs and dairy at the bottom. Corn, despite its decline in price, scores in the middle).
See the challenges laid out in the survey here.