CoBank 2023 Report: 11 Sectors Effecting the Rural Economy
CoBank has released its outlook for 2023. The report includes detailed analysis on the:
- global economy
- U.S. economy
- monetary policy
- U.S. government
- U.S ag economy
- grain/farm supply/biofuels
- animal protein
- dairy
- specialty crops
- rural electricity
- rural communications
“If we have learned anything over the past couple of years, it is that trying to predict the future is an extremely difficult business,” said Tom Halverson, CoBank President and Chief Executive Officer.
Halverson reflects that many events are leading to a new status in the global economy and globalization.
“From today’s standpoint, it is not clear what direction the world will take – what new construct will replace the integrated, liberalized global economic system that developed over the past 30 years. This is one of the great questions before us, and its answer has huge import for industries like agriculture that are deeply intertwined with global markets,” he says.
Here are topline takeaways from each of the categories. And click here for the full report.
Dan Kowalski says of the global economy: After two years defined by a strong economic rebound from the pandemic, the global economy will sputter in 2023.
Kowalski says of the U.S. economy: As financial conditions continue to tighten, we expect the U.S. economy to steadily soften through the first half of 2023, ushering in a brief, modest recession.
On U.S. monetary policy, Kowalski says: Our best gut prediction is that the Fed will pause rate hikes at 5.5% in Q2, a bit higher than consensus. But all of us are hoping the Fed’s gut is more accurate than our own.
About the direction of the U.S. government, Brain Cavey says: The 2022 midterm elections defied conventional wisdom as the party in control of the White House usually loses seats in both the House of Representatives and Senate. And the opening of the 118th Congress on Jan. 3, 2023, marks the official beginning of the farm bill reauthorization effort.
Rob Fox says of the U.S ag economy: In 2023 farm producers and related industries will begin to show financial strains from a relentless series of adversities: skyrocketing production costs, steeply higher interest rates, an elevated dollar, and weakening domestic and export demand caused by declining real incomes amidst spiraling inflation. And, in our view, none of the above headwinds are likely to reverse in the near term.
Kenneth Scott Zuckerberg say of the grain/farm supply/biofuels sectors: Looking forward to 2023, we see an environment of margin pressure amidst a slowing economy, rising interest rates, high labor and energy costs (namely diesel fuel), and trade uncertainty with China and Mexico.
Brian Earnest says of the animal protein sector: On the supply side, the high costs of feed, labor, and construction support the prevailing cautionary mood toward expanding production. On the demand side, consumers are reeling from rapidly declining real wages – a trend likely to continue well into 2023. Add in climate uncertainties, ESG pressures, and increasing labor and energy costs and it’s likely that 2023 will be a year when major market participants pause, reflect, and guard balance sheets.
Tanner Ehmke says of the dairy industry: After a year of stronger profits that allowed producers to pay down debt, dairy farm margins will come under more pressure in 2023.
Ehmke also shares on specialty crops: Specialty crop growers and processors face a multitude of headwinds in 2023: Costs of water, labor, fertilizer and other inputs are rising while a stronger U.S. dollar and weakening global economy drag on the U.S.’s ability to sell products abroad.
Teri Viswanath says of the rural electricity industry: The current energy crisis is surfacing age-old faultlines, with upstream fuel dependencies looking unsettlingly similar to those of the last crisis.
Jeff Johnston says of rural communications: We think the bigger risk to network builds in 2023 is the much discussed tight labor market and supply chain issues.
