If you’ve been struggling to keep up with the financial twists and turns of 2024, you’re not alone. Fortunately, the High Plains Farm Credit risk team has been analyzing the trends all along. As you close out the year, take a dive into the team’s insights relating to the U.S. economy and ag commodities.

Financial markets in 2024 have been nothing short of a wild ride. The economy in 2024 has been shaped by a mixture of inflationary pressures, labor market tightness, and global economic uncertainties. These factors have guided the Federal Open Market Committee’s (FOMC) monetary policy throughout the year. At the same time, the U.S. economy was quite resilient and continues to perform quite well, appearing to be accommodating the “soft landing” the Fed so desired.

Statements from the annual Jackson Hole Economic Symposium in August made it clear the committee did not welcome further cooling in the labor market. Ultimately, the FOMC has since cut the Fed Funds rate by 75 bps thus far in 2024.

Treasury yields fluctuated throughout 2024 in response to economic data and the Federal Reserve’s actions. The yield on the 10-year Treasury note was around 3.8% by late September, reflecting investor sentiment on economic resilience and the FOMC’s rate cuts. Short-term yields also saw movements, with the 2-year Treasury yield moving to 3.6%. Since the September FOMC meeting, Treasury yields have increased 50 bps or more across the yield curve.

For the remainder of 2024, GDP growth is expected to slow further, with the deceleration being attributed to the fading effects of fiscal stimulus and tighter monetary policy. In 2025, growth is forecasted to pick up slightly, averaging around 1.8% to 2.2%.
The unemployment rate is projected to rise modestly, reaching around 4.3% by the end of 2024 and stabilizing at similar levels in 2025. Job growth is expected to slow, reflecting a more cautious hiring environment and higher borrowing costs.

Inflation is anticipated to continue its downward trend, with core PCE prices rising by 2.4% in 2024 and further easing in 2025. The Federal Reserve is expected to continue cutting rates for the remainder of 2024 and through 2025, although at less accommodative levels than once thought.

As the Fed cuts rates, long-term Treasury yields are expected to decrease slightly before increasing, potentially normalizing the yield curve. The 10-year Treasury yield could gradually fall below 4.0% by the end of 2025. However, geopolitical risks and fiscal policies could introduce more volatility. Some economists argue that impacts from tariffs and a generally strong economy will drive long-term rates higher.

Overall, while the U.S. economy faces headwinds, the outlook suggests a soft landing with gradual improvements in growth, supported by accommodative monetary policy.

In 2024, agricultural commodity prices experienced a decline due to record-high production levels and favorable crop expectations. Key commodities like corn, soybeans, and wheat saw significant production increases, which exerted downward pressure on prices. Overall, food commodity prices fell by 3% in the third quarter of 2024, leaving them 8% below their levels from the previous year.

Additionally, lower commodity prices, combined with higher input costs and fewer government payments, contributed to a decline in net farm income. The USDA’s projections also indicate that agricultural prices are expected to continue their downward trend into 2025.

Donald Trump’s re-election brings a mix of potential challenges and support measures for the agricultural sector. The key factors will be how trade policies are managed and what support mechanisms are put in place to help farmers navigate these changes.

Agricultural markets, including soybeans and wheat, experienced declines after Trump’s re-election due to fears of retaliatory tariffs from China, a major buyer of U.S. agricultural products. If similar tariffs are reintroduced, it could further disrupt trade and reduce market access for U.S. agricultural exports.

However, to mitigate the impact of tariffs and trade disruptions, the Trump administration previously provided subsidies to farmers through programs like the Market Facilitation Program. It is likely that similar support measures could be reintroduced to help farmers cope with the economic challenges.

Contact our team of ag lending experts today! We’re dedicated to staying up to speed on the latest market information and industry insights so we can best serve you, our customer-stockholders.