There’s good and bad economic news for U.S. food and agriculture in the coming new year, according to the U.S. Department of Agriculture’s (USDA) authoritative outline of farm sector conditions for 2024. The good news: Interest rates and inflation will slow. The bad news: The overall U.S. economy will also slow.
The USDA projects an economic growth rate of 1.2 percent in 2024, compared to 1.7 percent this year. The inflation rate is projected to fall to 2.9 percent, a drop of 1.3 percentage points, and the bank prime rate is estimated to fall by nearly 0.5 points, to 7.7 percent.
The USDA economic projection applies to California as well as the rest of the U.S. California, however, is a unique and indispensable state when it comes to farming and the farm economy. It’s an agriculture nation state really. For example, the Golden State grows most of the specialty crops in the U.S., including many crops like almonds, walnuts, pistachios, avocados, grapes, strawberries and a number of others that are grown almost exclusively in the state.
To put the power and immense diversity of California’s farm economy in perspective relative to the rest of the U.S. farm states, over a third of all the country’s vegetables and nearly three-quarters of the country’s fruits and nuts are grown in California. Unique. Impressive. Indispensable to food production in America. An agriculture nation state.
More good and bad news: The USDA also is projecting that farm gate prices for the three major U.S. field crops – corn, soybeans, and wheat – will fall for the second year in 2024 (they also fell in 2023) but remain above pre-pandemic levels, while market prices for cattle and hogs will go up.
As noted earlier, California is the top and most diverse farm state in the nation. Its farmers and the state’s farm economy don’t rely on corn, soybeans and wheat, all of which are secondary (corn) and tertiary (wheat) crops in California. Soybeans generally aren’t even grown in the state.
In contrast, farmers and the farm economy in the huge Midwest farm belt rely almost entirely on corn, wheat and soybeans and grow very little else. The result of this fact is that very few if any farmers in California, as well as the state’s farm economy, won’t be impacted directly by the fall in corn, soybeans and wheat prices in 2024.
The state’s food processing and bread-baking industries, which rely on these crops, will probably be impacted somewhat. As such, look for potentially higher prices on bread products in grocery stores, as well as higher prices for food products that use corn, wheat or soybeans as the primary ingredient.
The increase in the market price of cattle and hogs, both of which are raised in California, will be good news to the state’s livestock producers. California has a large and diverse livestock industry; it’s the number one dairy state in the U.S. and is a leading producer of beef cattle, broiler chickens, turkey, sheep, goats and eggs.
Nationally, the USDA projects that in 2024 farmers will reduce corn and wheat plantings by a combined 5 million acres.
Soybean plantings will increase by about 3.7 million acres. The USDA says with normal weather and yields, the U.S. soybean crop could be the largest ever in history at 4.475 billion bushels.
The USDA also sees cotton acreage expanding in 2024, including in California, which is a major cotton production state. The state’s cotton growers also demonstrate the diversity California agriculture is famous for because they produce a whopping 90 percent of the nation’s Pima cotton
The bottom line nationally on the USDA projection is that lower commodity prices could squeeze farm income. The USDA’s current estimate is that U.S. net farm income, a key gauge of profitability, would decline to $140.4 billion in 2024, down by 2 percent from 2023. The USDA will update its estimate in February 2024.
The 2024 projections provide valuable information – a big view snapshot – for farmers, agribusinesses and the national and state farm economies, including California.
California though is clearly a unique farm state, with its own unique set of opportunities and economic challenges, as well as being part of the nation’s overall farm economy.
I try hard to make my column, Farm to Fork, practical and relevant for farmers and agriculture in general. It’s not an easy task. I also try as best I can to serve as an intelligence source and early warning system for agriculture, as well as to give a bit of farmer-friendly advice to elected officials and public policy makers.
To this end, I think the future of agriculture in California starting in 2024 will depend on the industry’s ability to navigate these 5 key issues: drought, climate change, agricultural legislation, farm labor availability/costs and trade.
Drought
A very wet 2023 has resulted in the word “drought” being used much less often this year in California, both among policy-makers, the general public and even farmers.
The good news though (see my column, Added Water Storage Finally Becoming Reality in California, in the November 2023 My Job Depends on Ag Magazine) is that after decades of inaction the state is moving forward on increasing water storage. This focus needs to continue and grow in 2024, even if we have a winter that is as wet as last year. We can’t let an abundance of water from the sky in one year (or even two years) take our eyes off the fact California needs more water storage, and if we don’t address it now, we’ll be in bad shape when the next drought arrives. California agriculture depends on water. Growing food requires water. We need to store more of it, as well as continuing to aggressively address water conservation on the farm and in the state’s food processing plants by using the latest technology available.
Climate Change
Like it or not climate change is real and it’s here. It’s going to be the biggest mega-issue for California farmers and agribusiness to deal with starting in 2024. Most specifically, over time there will be legislation on the federal and state level addressing climate change that changes how we live and how we farm. Farmers and ag industry folks need to take a major seat at the table and become part of the solution because climate change legislation is going to happen with or without industry participation. We can’t afford not to participate in a major way. The future of California agriculture depends on it.
Agricultural Legislation
In addition to the major legislation on climate change that’s going to be enacted over the coming years, ag legislation in general is key to the the future of California agriculture and the state’s farm economy. Inflation and recessions, for example, come and go but a piece of legislation that negatively impacts the farm economy in a significant way sticks around forever. Repeal is difficult.
Therefore, and as much as I hate to say it, farmers need to get more directly involved in politics and public policy. We also need to advocate more and better for California agriculture, constantly reminding the media, legislators and the general public about what a major and important economic force agriculture is not only for California but also for the nation and the world. Is there anything more important than growing food? Imagine how boring – and empty – grocery store produce departments would be without California-grown.
Farm Labor Availability and Costs
The farm worker shortage in California continues to grow, particularly in the state’s top farm region, the Central Valley. The only solution I see is comprehensive immigration reform or, because that seems impossible for Democrats and Republicans to agree on, legislation that opens the door wider to immigrants, particularly from Mexico and Latin American, to fast-track obtaining citizen status by working on farms. Immigrants comprise the majority of farm workers in the state already and historically. Without them California agriculture would be in a state of crisis.
The state of California has to take a lead in this with Congress and the President. The pandemic shed a new light on the importance of agriculture and that food shortages are possible in America. The mega-food inflation over the last few years has amplified this in the form of soaring prices at the grocery store, hitting Americans where it hurts most – in the wallet and the purse.
Labor costs will also continue to increase for the state’s farmers, made worse by the shortage of farm workers. Scarcity of supply (farm workers) means you have to pay those who are willing to do the work more money, including overtime. Higher farm labor costs mean farmers have to get higher prices for the crops they grow. This phenomenon is then reflected at the grocery store. As such, Californians, urban, suburban and rural, have a vested interest in legislation that enables more and easier immigration for farm work. We also want farm workers to get fair wages and benefits. Immigration reform of some meaningful kind is the key to achieving this.
Next year is an election year. This issue needs to be made top-of-mind to the candidates by the farm lobby. Being the number one farm state, California needs to lead the charge. The future of agriculture in California depends on having an adequate labor force and controlling farm labor costs.
Trade
Due to its large proportion of exports, the California agricultural sector is export dependent. For instance, over 70 percent of almonds are exported internationally. The state’s top exports include almonds, pistachios, dairy and dairy products, wine, and walnuts. This export dependency poses particular risks for California agriculture, including, among others: risks of inflation; increase in global competition; market concentration risk; and a concentration of shipping lines in foreign hands.
Global trade is vital for California’s farm economy. We must advocate more strongly for trade agreements that benefit agriculture, as well as put a stronger focus on creating more level playing fields with our trading partners, starting with China. We need to secure stronger export demand for the agriculture community in California.
One of the most important realities in American life today is that the era of cheap food (from the end of World War II to 2020) is over. In the last three years the price of groceries has increased by nearly 30 percent.
The cost of producing food also has increased astronomically, and continues to increase in 2023, particularly in California where farm inputs like fuel, fertilizer, labor, transportation and more continue to rise, although thankfully at lower rates than in the past few years. Next year will see more cost increases, although the taming of inflation should hopefully moderate the percentage increases even further.
Farmers and the allied ag industry, particularly in California, are resilient and innovative. But today it takes a village to support them and the farm economy.
I hope this column helps stimulate ideas and policies for 2024, particularly in California. The challenges are great but the opportunities remain strong.
Merry Christmas and Happy New Year. And, by the way, imagine trying to celebrate these two big, festive holidays without farmers and the food they produce. Impossible.
My Job Depends on Ag Magazine columnist and contributing editor Victor Martino is an agrifood industry consultant, entrepreneur and writer. One of his passions and current projects is working with farmers who want to develop their own branded food products. You can contact him at: victormartino415@gmail.com.
