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CoBank: Inflation, surging US dollar take toll on rural economy

The Fed’s battle against inflation amid a resilient U.S. economy has led to the highest interest rate environment since 2007 along with a climbing U.S. dollar. That is hurting key segments of the rural economy.

Golden Wheat Harvest With Tractor In Field Stanvpetersen Pixabay
stanvpetersen | Pixabay.com

A new report from CoBank said the Fed’s relentless 20-month attack on inflation has pushed long-term interest rates to their highest levels in years. The combination of high interest rates and a healthier-than-expected U.S. economy has kept the dollar much stronger than anyone would have expected.

The one-two punch of high borrowing costs and the strong dollar, which hurts our export competitiveness, have combined to take a disproportionate toll on rural industries like agriculture, forest products, mining and manufacturing.

Congress surprisingly averted a federal shutdown on September 30 by passing a 45-day continuing resolution, but the battle in the House is just getting started. That means farm bill negotiations will take a back seat while Congress struggles to pass its annual appropriations bills. The most likely outcome is an agreement by year-end to extend the current bill by a few months or up to a year or more.

Prices across the grain complex have been trending downward all year as the market has adjusted to lost Ukrainian exports. Though the broader basket of commodities has generally struggled this year, oil is the major exception: OPEC+ producers, notably Saudi Arabia, along with Russia are tightening supplies at the same time global consumption is finally returning to its pre-pandemic highs.

Read the full CoBank report here.

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