Exhibit 7: U.S. Agricultural Trade

Most U.S. ports showed significant decreases in container handling over the last several months versus last year, over the same period. As an example, the Port of Los Angeles saw a 43% drop in February 2023 compared to February 2022.13

Fuel costs will continue to be higher than recent years, at least in the short-term and possibly longer-term, even with crude oil back in the pre-COVID price range. Information from the U.S. Energy Information Administration shows that the No. 1 U.S. diesel fuel price is projected at $4.23/gallon in 2023, down 15% from the 2022 average of $4.99/gallon. The historical average price from 2017 to 2021 is $2.95/gallon.14 These continued high fuel prices impact agricultural production, manufacturing and shipping of all inputs and products.

13 The Port of Los Angeles. https://www.portoflosangeles.org/references/news_031723_feb_cargo#:~:text=February%20 2023%20loaded%20imports%20reached,year%2Dover%2Dyear%20decline

14 Gasoline and Diesel Fuel Update. U.S. Energy Information Administration. https://www.eia.gov/petroleum/gasdiesel/

The increase in fuel prices seen in recent years has been the result of refining capability issues as compared to supply issues; this is based on several observations:

• Diesel inventories remain low in the U.S.

• Prior to the Ukraine conflict, Europe imported more than 10% of its diesel with more than 50% of that coming directly from Russia. French refineries have been shut down due to strikes.

• Several U.S. refineries did not come back on-line for diesel/gasoline production after COVID shutdowns, including one refinery on the East Coast. The higher cost of acquiring crude oil (especially on the East Coast), a projected future demand, and an unwillingness by refiners to make billions of dollars in investments for which returns are questionable all contributed to refinery closures.

• New refining capabilities are limited and few are planned for in the U.S.

• New ship builds are favoring finished petroleum products versus crude oil vessels. Crude oil vessel orders are also significantly off their historic numbers.

Within the northeastern U.S., shale gas has significantly impacted the agricultural industry. Over the years, natural gas royalties have provided valuable alternative incomes for farms and landowners. The 2021 well head prices per MCF (Million Cubic Feet) saw a 107% increase over 2020 prices. 2022 prices were 89% higher than 2021.The price increase was due to the combination of weaker-than-usual production growth and strong demand (domestic and international). Current forecasts project that prices will remain elevated in the short term due to global supply and demand pressures. The Pennsylvania Independent Fiscal Office expects long-term prices will soften as more wells and production are brought on-line due to the high prices.15 Individual landowners could benefit as additional wells are drilled or brought into production on pads already located on the landowner’s property.

Land values have generally increased over the past several years and the increase is not necessarily due to productivity. Competition for land has increased. The solar, wind, and gas industries are rapidly acquiring land, as are investors. Residential buyers are driving demand for farmland, too, as the desire to live in rural areas is increasing. Land rents have also seen significant increases due to competition. Liquidity in the market has allowed higher prices to be paid for land and land rents. Government payments during COVID-19 helped contribute to the liquidity in the marketplace. Additional borrowing capacity was available to individuals from the liquidity, or the debt that was paid down from the liquidity. Whether land prices continue the upward trend is unknown. Increased interest rates would tend to slow the upward trend; however, in the recent short term, it has not. Only time will tell were land values go, but land values have a substantial impact on farms and their balance sheets.

Finally, in 2023 a new federal Farm Bill is due. Every five years Congress passes legislation that sets national agriculture, nutrition, conservation, and forestry policy. It is important that the agricultural industry is engaged in this process, providing input on issues important to agricultural producers and the supporting industry.

The remainder of this document includes indepth discussions on dairy, forest products, grain, and poultry, some of the main agricultural industries within Horizon Farm Credit’s territory across Delaware, Maryland, Pennsylvania, Virginia and West Virginia.

2022 was a great year for the dairy sector. Milk prices were the strongest they have been in the past ten years, surpassing the historical milk prices experienced in 2014. Horizon Farm Credit’s territory spans five states, each with unique opportunities for income in the dairy industry.

A Horizon Farm Credit Indexed Milk Price was established to evaluate the weighted average milk price based on the PA All Milk Price, Federal Milk Marketing Order 1 Statistical Uniform Price with relevant location adjustments, and the annual production percentage by state. Individual producers may have realized a gross milk price outside of this range, given their unique milk composition and market. Exhibit 8 depicts the 2022 Horizon Farm Credit Index Milk Price and range as well as the five-year average. 2022 was $5-$8/cwt higher than the five-year average, affording producers a welcomed profit margin. Most producers took advantage of profits to invest in capital expenditures delayed from several years of minimal margins, and prepaid for key inputs to help mitigate costs for the current year.

Sources: United States Department of Agriculture, National Agricultural Statistics Service, http://www.nass.usda.gov

United States Department of Agriculture, Economic Research Service, http://www.ers.usda.gov

Northeast Milk Marketing Area Administrator, Uniform Price and Producer Price Differential, http://www.fmmone.com

Rising prices were not isolated to only the income side. Most key input costs (feed, labor, fertilizer, fuel, etc.) had varying levels of increase during 2022. National Dairy Margin Coverage feed cost trends as shown in Exhibit 9 illustrate that feed costs were also $3-$8/cwt higher than the fiveyear average. This eroded the profit potential from the historical milk prices last year. It’s important to note that milk price trended down in Q3 and

Q4 of 2022, while feed costs remained relatively high and started to increase in Q4. Increased costs have contracted the growth of the U.S. dairy herd in the last quarter of the year as well. Labor also continued to be a pressing cost for dairies in 2022. From milkers to managers, tight job markets and rapidly increasing inflation saw wage increases across the dairy workforce.