Skip to main content
PGIM Real Estate LogoPGIM Real Estate Logo
    • Company Overview
    • Innovation
    • Leadership
    • Locations
    • Contact Us
    • Careers
  • Overview
    • Real Estate Equity
    • Real Estate Debt
    • Public REIT Securities
    • Defined Contribution
    • Agriculture
    • Sustainable Investing
    • Global Data Centers
  • Overview

    Property Sectors

    • Multifamily
    • Affordable
    • Commercial
    • Agriculture

    Capabilities

    • Core
    • Core Plus & Structured Debt
    • Agency

    Servicing

    • Loan Services
    • BorrowerConnect
    • PruXchange
  • Insights
  • Innovation
  • Sustainability
  • News
Agriculture
Agricultural Equity

Agriculture Landscape: October 2024AgricultureLandscape:October2024

Oct 15, 2024

6 mins

Download here

October 2024

Food-at-home inflation continues to be stable, whereas food-away-from-home inflation remains higher than expected. The value of U.S. agricultural imports is projected to exceed, by a wide margin, agricultural exports in 2025. Farm groups are becoming more concerned about new potential trade wars based on uncertainties about the upcoming November elections. Trading of Voluntary carbon credit contracts received final guidance from the Commodity Futures Trading Commission. This latest commentary explores the latest developments in the sector.

Food Sector

The U.S. Bureau of Labor Statistics’ September 2024 report indicated a 2.5% annual increase in the Consumer Price Index through August 2024. The food category ended with a +2.1% increase for the 12 months ending in August. During the same period, food at home and food away from home had annual increases of +0.9% and +4.0%, respectively.1

In the food-at-home category, cereals and bakery products as well as fruits and vegetables experienced annual declines of -0.3% and -0.2%, respectively; however, other food sectors are still experiencing increases such as meats, poultry, fish and eggs (+3.2%); nonalcoholic beverages (+1.3%); and dairy and related products (+0.4%).

Food away from home continues to experience higher increases, with a +4% annual rate through August 2024. Both full-service and limited-service meals and snacks reflected annual increases of +3.8% and +4.3%, respectively. Consumption patterns in restaurants have been strong despite some fatigue in consumer spending as menu prices notably increased postpandemic.

Trade and Legislation

In 2025, the United States is projected to have the largest agricultural trade deficit in decades. According to the U.S. Department of Agriculture (USDA), net trade is projected at a deficit of -$32 billion in 2024 and -$42.5 billion in 2025. The total value of agricultural exports in 2025 is forecast at $169.5 billion compared with imports at $212 billion. Based on those forecasts, agricultural imports are projected to grow at an annual rate of 6.4% compared with 2.7% for agricultural exports in the past decade. Although exports in 2025 are expected to be lower for the third consecutive year, the value is projected to be still higher than the five-year average of $165 billion.

The 2025 projected annual decline in export value is mainly the result of lower prices for oilseeds (-6%), corn (-7%), cotton (-18%), and beef (-11%), even though volume for those products is projected to increase from 2024. Grains and feeds, oilseeds and derived products as well as livestock, poultry and dairy account for 64% of total agricultural exports. International shipments of horticultural products are projected to expand in 2025 by approximately 3%, which includes tree nuts (+4.5%).2

Agricultural exporters and importers began October by experiencing a U.S. East Coast port strike because the International Longshoremen’s Association (ILA) and the United States Maritime Alliance had not agreed to a new contract set to expire at the end of September. The ILA union was seeking higher wages (+70%), higher starting wages, higher contributions to retirement plans, improved health-care benefits and requirements to prohibit automation that would risk more job losses. More than 70% of the value of agricultural exports and 75% of the volume were transported through ocean ports in 2023. The most significant impact was projected for containerized agricultural exports, which account for 30% of exports, with the remaining 70% exported in bulk carriers. East Coast ports handle nearly 46% of containers. On the imports front, 73% of all agricultural imports shipped via ocean are in containers, and the East Coast ports handle nearly 72% of those imports. According to the American Farm Bureau Federation, an estimated $1.4 billion in value for imported and exported products via containers is handled through ILA-controlled ports every week. Consumers could be affected with higher prices and supply shortages in the short term if the strike lasted for several days or weeks. This transportation strike comes after a Canadian rail strike threatened to affect the movement of goods between the United States and Canada in August, but the rail strike was resolved after a few days.3

Uncertainties about the upcoming U.S. presidential election are beginning to cause concern among various growers and trade groups due to the election’s potential to ignite another round of tariffs and trade barriers that could negatively affect exports of major grains, soybeans, tree nuts and other products to key importer countries and regions across the world. One of the presidential candidates has also threatened a major agricultural equipment manufacturer—with regard to the potential increase in tariffs that will be imposed—with a proposed move to build new tractors in Mexico.

As part of national security initiatives, the House of Representatives passed a bill that restricts the purchase of agricultural land by citizens of China, Russia, North Korea, or Iran. The bill was sent to the Senate for a vote before the end of the session. Several legislators have indicated that foreign landownership by those countries poses significant risks to the U.S. economy, especially to lands near U.S. military bases. The Foreign Investment Disclosure Act of 1978 requires foreign investors to notify to the USDA of any purchases of agricultural land. Legislators are expected to propose new bills to continue addressing the risks and impacts of the involvement of these countries in the area of agricultural biotechnology and other areas of the agricultural industry.4

The Commodity Futures Trading Commission has released final guidance for the trading of voluntary carbon credit derivative contracts to standardize and foster transparency and liquidity for market participants as well as to crack down on price manipulation. Voluntary carbon markets relates to the issuance, buying and selling of carbon credits, on a voluntary basis. Carbon credit derivatives give an issuer the right to emit one metric ton of carbon dioxide or a similar amount of greenhouse gases. Regulators in both the Americas and Europe had major concerns about a practice known as greenwashing, which involves deceptive practices by companies exaggerating their environmental credentials.5

Environmental Conditions

Major adverse weather events continue affecting the agricultural sector. In late September, Hurricane Helene had impacts on various agricultural areas across northern Florida and southeastern Georgia. Those regions encompass a wide variety of farm operations such as dairy farms, pecan orchards, poultry houses and row crop farmland (i.e., cotton, corn, peanuts and other vegetables). The Category 4 storm reached winds of 140 mph before landfall and weakened to 65 to 100 mph depending on the path of the storm.

In some areas of eastern Georgia, large pecan trees 40 to 50 years old have been reported completely destroyed, and farmers are beginning cleanup efforts to salvage, if possible, any of their crops slated for harvest in October. In response to the disasters, legislators have begun the process of requesting federal assistance to support farmers as well as others affected by the storm. In Florida, the commissioner of agriculture has already announced an interest-free loan program in support of farmers, ranchers and growers to restore and clean up vegetative debris in the aftermath of Hurricane Helene.

More than 100 environmental groups together sent a letter to three of the major U.S. banks—Bank of America, Citigroup and J.P.Morgan—urging them to stop financing livestock production due to climate concerns. The groups argue that those three banks account for more than 50% of the $134 billion in loans to meat, dairy and feed corporations, and industrial livestock is a high-emitter sector that threatens goals to reduce greenhouse gases and undermine the environmental commitments signed under the Paris Agreement. The international treaty agreement, signed in 2016, seeks to address commitments by various stakeholders to mitigate climate change and to hold increases in global average temperature to well below 2 degrees Celsius.

The U.S. government’s efforts to fund programs focused on the expansion of domestic biofuels and clean energy continue to gain traction. According to the USDA, an estimated $600 million has been used for funding more than 4,500 clean energy projects and more than $180 million for 200 projects to expand domestic biofuels. Farm waste such as almond shells and fruit peels has also begun gaining the attention of private investors and research institutions with regard to investigation of how such farm waste products can serve as potential sources to create bioproducts and biofuels. Although research for this new biomanufacturing industry is only at an early stage, it could have the potential to create ancillary income for farmers in the future.6

Financial Conditions

The recent reduction in interest rates could alleviate some of the weaker financial conditions for growers in various commodity sectors. Loan demand for agricultural real estate has been lower due to higher interest rates and higher liquidity built through years of stronger economic conditions, but agricultural operating loans continued to increase in most regions as liquidity starts compressing, according to the Federal Reserve Board of Kansas.

Agricultural Technology

Artificial intelligence (AI) is paving the way for development of technologies that could help automate the harvesting of fruit products that today require a significant number of humans. In September, the Citrus Research Board of California signed a funding agreement with an Israel-based company to develop a citrus-harvesting robot that is expected to initially harvest oranges for the fresh market. Enhancements to visual imagery for agricultural robots powered by AI will be essential for future farmland technologies that will generate agronomic insights and improve harvesting and other labor-intensive farm activities.7

Companies working on the development of new and better food products through the use of gene editing continue to gain interest from multinational agribusinesses. One example is a new joint venture between Corteva, Inc. (NYSE: CTVA), a global company involved in the manufacture and sale of a diverse portfolio of seeds, crop protection and digital services, and Pairwise, a company focusing on the use of CRISPR (clustered regularly interspaced short palindromic repeats) technology or genome-editing tools to (1) develop new varieties of fruits such as seedless blackberries and pitless cherries, vegetables and other crops that will have to adapt to different climate conditions in the future; (2) increase productivity; and (3) become more resistant to major diseases.8

REFERENCES

  1. CPI Home : U.S. Bureau of Labor Statistics (bls.gov) 
  2. USDA ERS - Outlook for U.S. Agricultural Trade 
  3. Port Strike Could Sink Access to Foreign Markets | Market Intel | American Farm Bureau Federation (fb.org) 
  4. House Votes to Limit Foreign Ownership of U.S. Agricultural Land (agriculture.com) 
  5. CFTC Approves Final Guidance Regarding the Listing of Voluntary Carbon Credit Derivative Contracts | CFTC 
  6. Biden–Harris Administration Invests in Domestic Biofuels and Clean Energy as Part of President Biden’s Investing in America Agenda | USDA 
  7. Research Funded for Citrus-Harvesting Robot – Technology, Citrus Industry magazine 
  8. Corteva, Pairwise Join Forces to Accelerate Gene Editing, Advance Climate Resilience in Agriculture

 

Download here
Explore
Agriculture Investing

We're uniquely positioned to serve institutional investors who seek portfolio diversification into the farmland asset class.

Explore

Meet the Team

  • Jamie Shen
    Jamie Shen

    Head of Agriculture

  • Juan Castro-Anzola
    Juan Castro-Anzola

    Director of Agriculture Underwriting Research & Agricultural Technology

  • Sarah Angus
    Sarah Angus

    Vice President

  • About Us

    • Company Overview
    • Leadership
    • Locations
    • Contact
    • Careers
    • Client Portals
  • Investments

    • Overview
    • Real Estate Equity
    • Real Estate Debt
    • Public REIT Securities
    • Defined Contribution
    • Agriculture
    • Sustainable Investing
    • Senior Housing
    • Mexico Industrial
  • Financing Solutions

    • Overview
    • Multifamily
    • Affordable
    • Commercial
    • Agriculture
    • Core
    • Core Plus & Structured Debt
    • Agency
    • Loan Services
  • ESG

    • ESG Overview
    • Environmental
    • Social
    • Governance
  • Insights & News

    • Insights
    • News
  • Other Resources

    • Form CRS
PGIM Real Estate Logo
  • Terms & Conditions
  • PGIM Privacy Center
  • Accessibility Help
  • Cookie Preference Center

Disclosure Statement (California)opens in a new window     Disclosure Statement (Japan)       Disclosure Statement (UK)opens in a new window      Disclosure Statement (Luxembourg)opens in a new window      

For Professional Investors only. All investments involve risk, including the possible loss of capital.

The content and materials presented here are for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect of any products or services to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. PGIM Real Estate is the real estate investment management business of PGIM, the principal asset management business of Prudential Financial, Inc. (“PFI”), a company incorporated and with its principal place of business in the United States. PGIM is a trading name of PGIM, Inc. and its global subsidiaries. PGIM, Inc. is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not imply a certain level of skill or training. 

In the United Kingdom, information is issued by PGIM Private Alternatives (UK) Limited with registered office: Grand Buildings, 1-3 Strand,  Trafalgar Square, London, WC2N 5HR. PGIM Private Alternatives (UK) Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number 181389). These materials are issued by PGIM Private Alternatives (UK) Limited to persons who are professional clients as defined under the rules of the FCA. In the European Economic Area (“EEA”), information is issued by PGIM Luxembourg S.A. with registered office: 2, boulevard de la Foire, L1528 Luxembourg. PGIM Luxembourg S.A. is authorized and regulated by the Commission de Surveillance du Sector Financier in Luxembourg (registration number A00001218) and operating on the basis of a European passport. In certain EEA countries, this information, where permitted, may be presented by either PGIM Private Alternatives (UK) Limited or PGIM Limited in reliance of provisions, exemptions, or licenses available to either PGIM Private Alternatives (UK) Limited or PGIM Limited under temporary permission arrangements following the exit of the United Kingdom from the European Union. PGIM Limited and PGIM Private Alternatives (UK) Limited  have their registered offices at: Grand Buildings, 1-3 Strand, Trafalgar Square, London WC2N 5HR. PGIM Limited is authorized and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number: 193418). PGIM Private Alternatives (UK) Limited is authorized and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number: 181389). These materials are issued by PGIM Luxembourg S.A., PGIM Limited or PGIM Private Alternatives (UK) Limited to persons who are professional clients as defined in the relevant local implementation of Directive 2014/65/EU (MiFID II) and/or to persons who are professional clients as defined under the rules of the FCA. 

In Japan, information is provided by PGIM Real Estate (Japan) Ltd., a Japanese asset manager that is registered with the Kanto Local Finance Bureau of Japan. In Hong Kong, information is issued by PGIM (Hong Kong) Limited, a regulated entity with the Securities and Futures Commission in Hong Kong to professional investors as defined in Section 1 of Part 1 of Schedule 1 of the Securities and Futures Ordinance (Cap. 571). In Singapore, information is issued by PGIM (Singapore) Pte. Ltd., a regulated entity with the Monetary Authority of Singapore under a Capital Markets Services License to conduct fund management and an exempt financial adviser.

In Australia, information is issued by PGIM (Australia) Pty Ltd (“PGIM Australia”) for the general information of its wholesale clients (as defined in the Corporations Act 2001). PGIM Australia is an Australian financial services (“AFS”) licence holder (AFS licence number 544946). 

PFI of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. Prudential, PGIM, their respective logos and Rock design are service marks of PFI and its related entities, registered in many jurisdictions worldwide.

The information on this website is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. In making the information available on this website, PGIM, Inc. and its affiliates are not acting as your fiduciary.

©2024 PFI and its related entities.

 

Links

Links from this website to a non-PGIM website may be provided for the user’s convenience only. PGIM does not control or review these third-party sites nor does the provision of a link imply any endorsement of our association with such non-PGIM sites. Your linking to any websites from this website is at your own risk. To the extent that any information on this website relates to a third party, this information has been provided by that third party and is the sole responsibility of such third party and, as such, PGIM accepts no liability for such information. Subject to the terms of applicable service or other agreements, we will remove any link from this website upon request from the owner of the linked website.

Links from this website to affiliates are provided for the user’s convenience only. Each affiliate’s website is issued or approved solely by the applicable affiliate and unless stated otherwise on such affiliate’s website, is not issued by PGIM, Ltd. or any other non-U.S. entity. Each affiliate is solely responsible for the content of its respective website. The laws governing any affiliate and its respective websites may differ from the laws governing pgim.com and the relevant website's terms and conditions and policies may differ from those of pgim.com.

©2024 PFI and its related entities.

 

NMLS ID# - 172545

PGIM Real Estate Logo
PGIM Real Estate Logo

You are viewing this page in preview mode.

Edit Page