DENVER – The U.S. economy continues to outperform expectations as stimulus funds are fueling robust consumer spending, according to the most recent quarterly report from CoBank’s Knowledge Exchange.
CoBank is a co-operative bank which provides loans and other financial services for agribusinesses and rural power, water and communications providers in all 50 states.
Consensus forecasts point to 7% GDP growth for 2021, the fastest rate of expansion since 1984. Inflation is inevitable, however, as the 2020 price declines will widen year-over-year inflation over the next two quarters, and new upward price pressure should push headline inflation above 3%, according to the report.
The transition to a less COVID-restricted world has begun. But for the economy and rural industries, there will be no going back to pre- COVID conditions, according to the report. A transformed policy environment and awakened commodity markets are making way for a new operating environment.
“The policy focus in Washington is shifting from crisis management to building for the future,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange division. “And the outcome of the pres- ident’s infrastructure plan will have substantial implications for rural water, power and broadband providers. Hundreds of billions of dollars in funding would reshape these industries and intensify the current focus on climate resilience and social equity.”
The report said a cyclical turn in grain pricing, driven by strong demand and tight stocks, continued during the first quarter of 2021 and has picked up further gains ahead of spring planting. Accumulated grain exports to China have been very strong. While the backdrop for the grain and oilseed complex is positive, there are issues worth monitoring that could result in price volatility in the coming months. A recent surge of African Swine Fever in Asian countries could temporarily slow soybean demand.
Farm supply retailers are positioned to benefit from an exceptionally strong spring agronomy season, outpacing fall and spring 2020, according to the report. Financially strong U.S. crop farmers should increase spending given a 3.1% increase in planted corn, soybean and wheat acres.