The Quarterly: Omicron Upends Supply Chain Recovery

Against all hope for a better start to 2022, omicron has crashed the New Year’s party. Renewed supply chain disruptions are being felt throughout the economy, causing empty shelves again and threatening to fan the flames of inflation. Effects from the omicron variant should be short-lived relative to delta, but it will be several more weeks before the impact of sick workers passes.

Amidst this persistent COVID gloom, the economic backdrop is bright. Consumers continue to spend and workers are re-entering the labor pool. But as the economy marches on, so does elevated inflation, and the Fed is now determined to get prices under control. The first interest rate hike is likely to come in March, and much more monetary tightening is likely to follow.

The agricultural sector will battle through familiar challenges in coming weeks, as persistent labor challenges become acute. Dairy and animal protein processors will try to minimize production slowdowns, and farm input retailers will scramble to build inventory before spring field work begins. Fortunately, most of agriculture is facing these disruptions from a position of price and margin strength.

The communications sector is actively rolling out billions of dollars in new rural broadband spending, and the power sector is grappling with higher energy costs as the messy conversion to renewable energy sources continues. Across rural America, 2022 begins with significant challenges, but also with potential for substantial upside.

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