This Week’s Economic Update, April 24, 2023

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Baseball is in full swing with a number of new rules.  The installation of pitch clocks has sped the game up dramatically.  Instead of compressing 5 minutes of action into 3 ½ hours, we are seeing the same amount of action in 2 ½ hours.  This is great for the fans but not so good for the venders.  Four teams, the Twins, Rangers, Diamondbacks and of course the Brewers, have extended beer sales to the end of the 8th inning now trying to boost concession revenues.  With the speed of the game, that last beer bought in the 8th might have to be chugged.

2023 is the year we supposedly get a new farm bill. The process kicked off late last year with field hearings in Michigan and Arkansas.  As a new farm bill is introduced every five years, the negotiations currently underway will set the stage for major changes not only on the farm but throughout our economy.

Seemingly the first target of discussion is the eligibility for the food stamp program, also known as the Supplemental Nutrition Assistance Program, (SNAP).  The two sides are hammering out the type of benefits as well as the qualification standards for what is one of the largest cost items in the bill.  The SNAP program alone accounts for $127 Billion of spending during the 2023 budget year.  The high cost of food due to recent inflation is a primary talking point on how much and who should receive benefits.  There is also a great deal of talk about the types of food covered in the program as the diets of most Americans is not leading to a healthy lifestyle.

Another ripple in the Farm Bill will be the debt ceiling discussions that may or may not be going on right now.  With the Democrats and Republicans so far apart on the budget and debt, we will have to see how the two sides can reach some sort of agreement.  While based on the current news stories you would think that nutrition and food programs such as SNAP were the only aspect.  However, the core parts that impact the farm and farmers the most include the levels of crop insurance, commodity price supports, international trade programs and research programs where investments will enhance the efficiencies of farms for years to come.

2022 was a pretty good year for most farms, at least those not stricken in the drought in the middle of the country.  Most agriculture bankers that I have heard from recently indicate that their clients are in a better position this year than last.  While crop inputs are higher again this year including both seed and fertilizer, they have more cash on hand to meet the need.  Contract prices appear to be sufficient to provide a pretty good return so far.  There continues to be concern about Europe and the production capability there for wheat and corn.  At this point, if the harvest is good in the US, the farmers should have another very good year.

The April manufacturing numbers continue to be soft.  The Philly Fed Manufacturing index dumped to a negative 31 after a March number of negative 23.  New Orders in the eastern sector fell by 22.7% indicating that consumers are cutting back dramatically.  Looking locally, and at various inventory reports, there is no shortage of certain items, including pick up trucks, that are awaiting buyers.  At this rate of inventory growth, prices on certain products should be starting to fall. 

The catch here is the price of energy.  Gas and Diesel appear to have peaked for now.  Crude Oil is hovering in the upper $70 dollar range, not nearly as high as expected when OPEC announced its production cut.  In the US, production continues to be flat if not slowly declining.  Supplies are trending downward so there is little expectation that the prices at the pump will fall anytime soon. 

Have a great week.



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