In September, 75 percent of ag economists warned of an impending agricultural recession. October brought slight optimism to the Ag Economists’ Monthly Monitor, attributed to rising U.S. corn export demand and forecasts about cattle herd rebuilding. Yet, economists remain cautious about the potential impact of the upcoming election.
Harvest is winding down across the Midwest, and some farmers saw a record harvest pace in 2024. Harvest is typically the time of year the market sets harvest lows, but this year, commodities, like corn and wheat, came to life.
“I think over the last month, we’ve seen a little bit of a rebound or stabilization of prices, if you will. Some of that’s simply been fund short covering that is supported, some of it is a little better long-term picture for wheat and for corn, although for soybeans, it’s still looking somewhat bleak long-term,” said Arlan Suderman, chief commodities economist with StoneX Group.
The latest Ag Economists’ Monthly Monitor, which is a survey of nearly 70 ag economists and conducted by Farm Jounal each month, reflected that with short-term sentiments among economists seeing a slight improvement, but a bigger jump when asked to compare them to last year.
“We could have told you two to three years ago that, after a period of high prices, eventually we were going to have a recovery in production and that was going to suppress prices probably more than input costs. We knew that. I think when you take into account expectations heading into the year, has it deteriorated more than expectations? Probably not. We just know that we’re worse off today than where we were,” said Ben Brown, an agricultural economist with the University of Missouri.
Outlook for Livestock and Dairy
Each month, the Monthly Monitor asks economists to list the factors that could impact livestock prices over the next six months. In the October survey, economists said:
- Herd size and tight cattle supplies
- Outcome of the election
- Health of general economy in the U.S. and consumer demand changes
- Disease issues (H5N1, etc.)
- Developments in China and other major importers
- Consumer demand given high meat and dairy prices
- Weather in the Corn Belt and Great Plains
When Will Beef Producers Start to Rebuild Their Herds?
The October survey also asked economists when they think producers will start to rebuild their cow herds:
- 50 percent said in the first half of 2026
- 30 percent think it’ll happen the second half of 2025
- 20 percent said in the first half of next year.
“We’ve seen a slowdown of cow slaughter. That’s step one, but that’s not rebuilding,” said Suderman. “It really comes down to when do we turn this weather pattern around and start getting the pasture, the feed necessary in the West in order to incentivize rebuilding the cowherd? That is the problem right now.”
Other than weather, what else is preventing producers from starting to rebuild? Economists say it’s the average age of producers, replacement costs and heifer prices.
“I also think there is this economic pull on producers of ‘how can I justify retaining these heifers when they’re bringing the prices that they are?’” said Brown.
The Inflation Factor
When you look at what could impact both livestock and row crop producers over the next six months, a major wild card is interest rates. The October survey asked economists how much farm interest rates need to fall to find economic stability for farmers, and 46% said 2%.
But even with the Fed cutting the benchmark interest rate last month, interest rates have actually gone up, not down.
“The two-year break-even inflation rate is what the market trades. It’s expectations of what inflation’s going to average over the next two years. And over the last six weeks or so, we have seen it jump a full percentage point. That is a significant short-term jump, saying that reinflation fears are coming back in a hurry,” Suderman said.
Suderman points out the Fed can influence mid- and longer-term rates, but the agency can’t control them. And it’s concerns about inflation that are pushing those rates back up again.
“That could all change over the next couple of weeks, or it could be reinvigorated. I think longer term, what I’m looking for is a return to the interest rates that we saw in the ‘90s and early 2000. But I think there’s going to be a lot of volatility in getting there,” Suderman said.
Election Impact on Ag
Ahead of the election, the Monthly Monitor asked economists which presidential candidate will be more effective at taming inflation. Fifty-three percent said Donald Trump.
When it comes to providing more certainty on farm policy and crop insurance, 61 percent of economists said Trump will provide more certainty.
However, when looking at policies that benefit biofuels, 53 percent of economists said Kamala Harris.
Today, there is no clarity on 45Z that’s causing soybean processors like Cargill and Bunge to possibly slow or even idle production by the end of the year.
“We have industry looking to shut down production of biofuel. If we don’t get the 45Z requirements here released soon, and that doesn’t look likely, unfortunately, that’s going to hurt demand for soybean crushing for soybeans per se,” Suderman said.
“The fact that we don’t have those today, I think, is impeding investment in the sector. And people are asking for that before they spend millions of dollars to do that. And I think that has been a hiccup,” said Brown.
Role of the Federal Government
Heading into a crucial election with not just the presidential race, but also the House and Senate, the October Ag Economists’ Monthly Monitor asked, “What is the most important role of the federal government?”
Forty-six percent of economists ranked financial aid as the top priority. Nearly 43 percent said it’s passing a farm bill.
“There’s all this discussion that the safety net is inadequate relative to commodity programs, and there’s the potential for some rather large ARC and PLC payments to come,” said Brown. “But are they too late? That’s the question. Is it too late in the cycle? Does any type of ad hoc support through a farm financial package bridge that gap?”
The October survey of economists also asked them to weigh in on the fate of the farm bill. The majority of economists think Congress will pass a new farm bill in 2025, but 21 percent think it could be 2026 before it crosses the finish line.
Feed Prices Over the Next 6 Months
Each month, the Monthly Monitor also asks economists to list the factors that could impact crop prices over the next six months. In the latest survey, economists said:
- South American weather
- U.S.-China trade relations
- Election outcomes
- Global geopolitical risks
- Biofuel demand
Conclusion
The October Monthly Monitor reflects cautious optimism in certain areas of agriculture, marked by export strengths and potential price recoveries. But the optimism is shadowed by long-term rebuilding challenges, weather dependencies and the impact of the upcoming election.
