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March 8, 2022

New Economic Report: A Glimpse into the 2022 Agricultural Economy

Learn more about the seven most influential factors impacting agricultural economics in 2022. 

From supply chain shortages to spiking input costs, farmers were faced with challenges in 2021 that required dedication and ingenuity to overcome. In response, they adapted their operations to meet a rising consumer demand for agricultural products. Despite the challenges, the combination of strong commodity prices and export demand has led 2021 farm income to reach its highest level since 2013.  

In 2022, net farm income is forecasted to decline 4.5 percent but still 26 percent higher than the 10-year average. AgAmerica’s Chief Economist Dr. John Penson has been monitoring the most influential factors impacting farm income in 2022 and consolidated his insights into a comprehensive economic report.  

Click the button below to download the full whitepaper or keep reading to explore the seven key economic factors impacting farmers, ranchers, and rural landowners in 2022. 

Seven Factors Influencing the U.S. Farm Economy in 2022 

1. Supply Chain Shortages and Bottlenecks 

One of the central headlines in 2021, supply chain shortages and bottlenecks are expected to continue well into 2022. These bottlenecks have led to far-reaching impacts on farmers and ranchers such as making it difficult to find machinery parts and transport commodities.  

Shortages and bottlenecks in the U.S. ag sector

Supply chain shortages are a central contributor to inflation and spiking farm production costs. While this issue is outside of your control, you can control your response. Securing working capital, lowering production costs, increasing efficiencies, and engaging in strategic business planning can all help offset the repercussions of supply chain shortages. 

2. Inflation 

As a result of supply chain shortages and rising consumer demand, inflation is expected to play a major role in the U.S. agricultural economy in 2022. Therefore, understanding how to minimize production costs will be key.  

Inflation and rising input prices for U.S. agriculture

Case Study Highlight: Read how a Southeast farmer was able to buy the land he leased for years and secure flexible working capital amid rising inflation. 

3. Interest Rates 

Interest rates are expected to trend upward this year—and locking in a fixed rate soon may be a wise idea.  

Interest rates accounted for nearly 6% of total cash farm expenses in 2021.

4. Severe Weather 

In addition to economic variables, natural forces will also play an important role in the 2022 farm sector. From the ongoing drought to severe weather, farmers will need to respond to weather events impacting their operation’s success. 

U.S. 2021 billion-dollar weather and climate disasters

This year, farmers and ranchers in the West are still facing severe impacts from drought. More than 185 million acres of crops and nearly 23 million beef cattle were affected by drought in 2021, according to the USDA. Due to the increasing drought, water restrictions may tighten, making efficient use of resources essential. 

5. Federal Spending 

After record government spending in 2020, direct government payments are expected to further decline in 2022.  

Share of net farm income from direct government payments

Download the full whitepaper to learn more about how different government programs will be impacted in the coming years. 

6. Legislation 

Perhaps one of the most disputed and discussed topics of 2022, agricultural legislation has the potential to either significantly help or burden American farmers and ranchers.  

Ag policy legislative topics of interest in 2022

Key legislation to keep an eye on in 2022 includes the Infrastructure Investment and Jobs Act, a la carte legislation from what’s left of the Build Back Better Plan, and the 2023 Farm Bill. With 2022 agricultural legislation in a state of uncertainty, more farmers and industry groups are stepping up to ensure the voice of agriculture is heard throughout legislative discussions. 

7. Trade  

Continued discussions surrounding global trade are expected to continue into 2022, with a major focus on China.  

U.S. ag export trade

Embrace opportunity through the power of knowledge to make decisions that benefit the long-term growth of your operation. While only time will tell what the 2022 agricultural economy will look like, it is important to stay up to date on important economic factors that impact your operation. Having an understanding of what to expect in 2022 can help you craft a strategic business plan that allows your operation to adapt and withstand external economic pressures.  

Learn more about what to expect in the 2022 farm sector by downloading our free report, U.S. Agricultural Economy in 2022.  

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