The Quarterly: Adapting to Another Global Crisis

Russia’s attack on Ukraine will have long-lasting implications for U.S. rural industries

The Russian invasion of Ukraine has brought on a new set of economic conditions that are reshaping financial and commodity markets. For the remainder of 2022, global growth will be slower and most commodity prices higher than previously expected. Key agricultural inputs are in short supply and energy prices are near multi-year highs despite the biggest ever release from the U.S. strategic petroleum reserves.

These factors are amplifying already high inflation, and the Fed is poised to let air out of the easy money balloon more quickly. This will slow the U.S. economy and increase 2023 recession risks meaningfully. Businesses that are enduring higher commodity costs will soon face markedly higher interest rates as well.

This all paints a mixed picture for CoBank’s customers. Agricultural commodity prices have more or less kept pace with input cost hikes, incentivizing producers to expand their operations despite record high costs. U.S. grain production will be critical for supplying the world as Ukraine struggles to plant, harvest, and ship its corn, wheat, and sunflower seed.

Both the agricultural and power sectors are wrestling with higher natural gas prices. And crude oil supplies are at a decade-low. The ripple effects are likely to expand in two directions: higher persistent costs throughout the economy and greater incentives to transition away from fossil fuels.

Once again, amidst a global crisis, U.S. rural industries are doing what they need to keep the lights on, water flowing, communications powered, and the world fed.

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