Forces That Will Impact the Agriculture Economy in 2021
The speed of the U.S.’s rural economic recovery will largely hinge on the availability, dissemination, and reach of COVID-19 vaccines, pushing the expected burst of pent-up consumer demand into the latter half of 2021, according to a comprehensive year-ahead outlook report from CoBank’s Knowledge Exchange division.
“The coming year will be a recovery year for most Americans and the businesses that make up the U.S. economy,” says Dan Kowalski, Vice President of CoBank’s Knowledge Exchange division. “The early part of the year should look very different than the latter, but in total, economic growth is estimated to be about 4%, following a retreat of roughly 4% in 2020.”
The CoBank 2021 outlook report examines key factors that will shape agriculture and market sectors that serve rural communities throughout the U.S.
Global View: Uneven Economic Recovery Ahead
Against all hope that COVID would fade in 2020, it will continue to steer the global economy in 2021. Global economic recovery was very uneven in 2020, and given the current surge in virus cases, that is expected to remain the case in 2021. CoBank’s confidence in GDP forecasts has increased since mid-2020, but uncertainties related to the dissemination and uptake of vaccines mean timing the recovery is still exceedingly difficult. Of all major economies, China recovered the fastest from the pandemic and will finish 2020 in remarkably good economic shape, while Europe has suffered the most. Perhaps one of the longest lingering impacts from COVID will be the mountains of debt absorbed by most governments around the world.
U.S. Economy: COVID Is Still the Economy
A post-COVID bounce is coming to the U.S. in 2021, but it’s unlikely to happen soon. Much of the year’s economic trajectory will depend on fiscal policy decisions made over the next couple of months. Roughly 10 million Americans who lost their jobs early in the pandemic have yet to find work, and many of them are receiving some form of public support. If and how Congress chooses to fund further relief will impact the speed of the recovery. Throughout the first half of the coming year, many businesses will be trying to just keep the doors open. Optimism, however, should spur investment and capex decisions in the first half of the year. Opportunistic firms will attempt to time the comeback with new investments into the leisure and broader services sectors. Not all things will return to the way they were, though. Some industries may never fully recover.
Specialty Crops: Preparing for More Shifts in Consumer Demand
The specialty crops sector will continue to adapt to historic shifts in logistics and supply chains in 2021 as the COVID-19 pandemic causes consumers to purchase more food at retail and less through foodservice. With thousands more restaurants expected to permanently close through the winter months as COVID-19 cases surge, specialty crop growers and the supply chains that deliver fruits, nuts, and vegetables will have to continue adapting to a consumer eating more at home. Some growers, packers, and processors have successfully managed to increase or reroute products into retail channels like grocery stores and home delivery of food boxes. However, steep financial losses from the loss of foodservice contracts will ultimately result in the rationalization of some processing assets and production acreage.
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