2021 Q1: U.S. Rural Economic Review

With difficult months still ahead, second half of the year should power the U.S. economy

2021 has quickly altered the political and market landscape. And optimism, particularly about the second half of the year, is rising. But to get there, all of us must muddle through for a few months more.

For now, the pandemic is still very much impacting the U.S. economy and rural industries. But the dissemination of vaccines and dramatic improvement in commodity prices is enabling markets to look over the horizon to better days ahead. The shakeup in political power in Washington has boosted confidence that more fiscal spending is on its way, steepening the yield curve and raising GDP forecasts.

Without question, there are difficult months still ahead. However, the second half of the year looks increasingly positive if vaccine uptake advances as hoped.

In the meantime, grain-related industries are riding a wave of commodity price increases and profitability not seen in years. Corn and soybean prices have climbed more than 60% since August, turning margins for many from red to black. The reverse is true, however, for those in animal protein, dairy, and biofuels as they struggle with the sudden increase in cost.

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Disclaimer: This material is for informational purposes only and cannot be relied on to replace your own judgment or that of the professionals you work with in assessing the accuracy or relevance of the information to your own operations. Nothing in this material shall constitute a commitment by American AgCredit to lend money or extend credit. This information is provided independent of any lending, other financing or insurance transaction. This material is a compilation of outside sources and the various authors’ opinions. Assumptions have been made for modeling purposes. American AgCredit does not represent that any such assumptions will reflect future events.

This quarterly update is prepared by CoBank’s Knowledge Exchange Division.