Eight Challenges for U.S. Agriculture in 2024 and How to Mitigate Them
Strong liquidity is helping farmers overcome challenges in agriculture—but risk remains.
In 2023, inflation-adjusted net farm income is forecasted to decline 20 percent, falling from several years of record highs. This trend is expected to continue into 2024, albeit at a slower pace, with income falling close to the five-year average. Fortunately, many farmers are entering the year with strong liquidity. Taking proactive steps to protect this liquidity will be key when minimizing financial challenges for your farm in 2024.
In this article, we’ll break down the eight most pressing challenges in agriculture right now and identify key strategies farmers can use to alleviate financial risk.
Challenges in Agriculture for 2024
1. U.S. Gross Domestic Product (GDP) is falling behind.
Worldwide GDP is expected to grow by 2.6 percent in 2024, exceeding consensus forecasts. The United States will be a bit behind with an economic growth rate of 1.2 percent in 2024, indicating a deceleration from 2023.
Key Challenges in Agriculture: Consumer spending, a key driver for agriculture, is expected to face headwinds in 2024 due to the depletion of personal savings and a rapid rise in household debt.
2. Interest rates are increasing.
After several rate hikes in 2023, the Federal Reserve plans to maintain a higher target rate until the latter half of 2024, indicating a commitment to a soft landing and avoiding a severe recession. While cuts may begin to occur, this means interest rates will likely remain elevated in 2024.
Key Challenges in Agriculture: Higher interest rates will prompt farmers to adjust financial strategies, relying more on savings and tightening budgets rather than term loans.
3. Inflation Is slowing, but still a concern.
In 2023, food inflation showed a significant slowdown with a year-over-year increase of 3.3 percent (2.1 percent nationally and 5.4 percent abroad). The good news is these numbers are moderate compared to 2022, which saw an 11.8 percent increase.
Key Challenges in Agriculture: The 2024 food price outlook is uncertain, with projections ranging from a potential 5.5 percent decrease to a 7.8 percent increase. Despite this, historical data indicates food price deflation is unlikely, and occurred only once in 2016 in the past 50 years.
4. Net farm income is nearing the five-year average.
The USDA estimated a 20 percent drop in inflation-adjusted net farm income in 2023 due to lower commodity prices, higher input costs, and reduced government payments. Despite the decline, the outlook is still considered historically strong, with agricultural economists anticipating a moderate dip in net farm income in 2024, approaching the five-year average.
Key Challenges in Agriculture: The 2024 outlook suggests a potential eight percent decrease in net cash farm income compared to 2023 levels, adjusted for weaker commodity prices and a modest increase in input prices.
5. Total farm input costs are still increasing (but at a slower rate).
Farm input prices for 2023 showed minimal change from 2022, with a substantial 14.1 percent decrease in fertilizer prices being offset by increases in other inputs like labor and interest costs.
Key Challenges in Agriculture: This trend is expected to continue into 2024, with overall total costs projected to have minimal increases compared to previous years. Elevated input costs, combined with lower cash receipts, could indicate a margin squeeze ahead for farmers.
6. The farm bill is delayed.
The 2018 farm bill expired on September 30, 2023, but progress remains limited. Lawmakers passed a one-year extension in November 2023, providing more time to finalize the next bill, but divisions persist on key issues. Some farmers are hopeful that the next farm bill will see adjusted reference prices, while others are more focused on increased accessibility to crop insurance. However, Congress is delayed by debate on the price tag of the bill’s two largest programs—nutrition and conservation.
Key Challenges in Agriculture: Lawmakers express confidence in finalizing the next farm bill before the one-year extension expires on September 30, 2024, aiming for completion by the summer, but uncertainties about key budgets and partisan conflict could impact the schedule further.
7. The U.S. agricultural trade deficit is growing.
The agricultural trade deficit is widening, posing challenges for American farmers due to global competition. The USDA projects a substantial agricultural trade deficit of $30.5 billion for fiscal year 2024, the largest trade imbalance in nominal terms since 1935.
Despite these challenges, the USDA notes trade policy wins that provide new opportunities for U.S. farmers, including market access in Vietnam, tariff reductions in India, legislative recognition in Canada, market access for potatoes in Mexico, renegotiation in Japan, and import certification assurance in Brazil.
Key Challenges in Agriculture: The U.S. is expected to experience a shift from a positive to a negative agricultural trade balance in the next decade, but the potential devaluation of the dollar and efforts to diversify trade partners could strengthen U.S. agriculture exports in the future.
8. Technology and AI are transforming agriculture.
The U.S. agricultural sector is undergoing a transformative shift in technological innovation. Generative artificial intelligence (AI) is expected to play a crucial role, with the automation of around 25 percent of labor tasks in advanced economies and 10 to 20 percent in emerging economies predicted by 2034.
Key Challenges in Agriculture: Challenges in AI adoption include data security concerns as AI relies on transferring data from farm fields to the cloud. Additionally, accessibility is an ongoing challenge, with more than 22 percent of rural communities lacking reliable broadband internet access, hindering the widespread implementation of AI in agriculture.
Mitigating Challenges in Agriculture
The economy is slowing down, but there are several ways farmers can mitigate challenges and grow more resilient in 2024.
- Invest in Financial Resilience – Farmers can strategically build capital reserves by prioritizing investments, leveraging equity, and restructuring debt.
- Plan for Tax Season – Farmers can partner with a tax service to tailor income expectations and create strategies to either increase or decrease taxable income.
- Create a Marketing Plan – A good marketing plan can help farmers explore additional revenue streams. Part of this means evaluating storage and timing, negotiating flexible contracts, diversifying marketing strategies, and utilizing risk management tools.
- Increase Weather Resilience – Drought, wildfires, and other weather challenges pose a serious danger to farming operations. Investing in soil testing for insights into soil health and nutrient levels is a fundamental step in building weather resilience.
- Find a Trusted Team – Having a reliable advisory team to help you navigate complex financial options in agriculture ensures informed decision-making for long-term success and financial stability.
Start Preparing with the Farm Risk Management Checklist
Proactive planning will be key in ensuring your operation remains resilient—unlock the five ways you can plan for success.
Work with a Team Committed to Helping You Overcome Challenges in Agriculture
With farm income declining and the economy slowing down, there are several economic challenges lying ahead for farmers in 2024. AgAmerica understands the value farmers have to our nation and the great risk in letting Rural America go unassisted.
That’s why our expert team is dedicated to providing flexible financial solutions and farmer-first services for Rural America. If you’re worried about managing financial risk in 2024, don’t hesitate to contact us for help, or download the 2024 Farm Economy Outlook Report to start planning.
