Agricultural Economics Economic Outlook 2010 Craig Infanger October 2009

Agricultural Economics

Economic Outlook 2010Economic Outlook 2010

Craig Infanger

October 2009




One year after….


One year after….


One year after….


Bailout + Credit Programs + Stimulus = $10T!





U.S. GDP $14.1 TrillionU.S. GDP $14.1 Trillion


Actual and Projected Federal Budget Surplus and Deficits, FY97-10

Source: CBO

-1600-1400-1200-1000-800-600-400-200

0200400

Fiscal Year

Billions $


Actual and Projected Federal Budget Surplus and Deficits, FY97-10

Source: CBO

-1600-1400-1200-1000-800-600-400-200

0200400

Fiscal Year

Billions $


Actual and Projected Federal Budget Deficits and Debt Held by Public, FY97-12

Source: CBO

-2000

0

2000

4000

6000

8000

10000

12000

Fiscal Year

Billions $

Debt


Has massive intervention worked?

I don’t think anyone fully understands yet how much damage was done to the U.S. economy by the events of September 2008.

Daniel Henninger

WSJ 9-10-09


Working our way past “crisis” mode


Focus shifts to local real estate markets and smaller banks

100100


Worst recession since WWII

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0Annualized percent change

Quarterly U.S. Real Gross Domestic Product Growth

Source: Bureau of Economic Analysis



-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0






-8.0

-6.0

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8.0





What kind of recovery can we expect?

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-6.0

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6.0

8.0




V, U, or W?



-8.0

-6.0

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8.0




Square Root?

2% - 3%



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8.0

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Annualized percent change



Bathtub?


Unemployment: Jobless Recovery Again?

-1500

-1000

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0

500

1000

Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08

0

1

2

3

4

5

6

7

8

9

10Change from previous month (Thousands)

Job Change(Left Scale)

Unemployment Rate(Right Scale)

Source: Bureau of Labor Statistics

Change in Payroll Employment and Unemployment Rate

Percent

Jan. = -1,239,000 Jan. = -1,239,000 Total Job Loss = >7mTotal Job Loss = >7m


Unemployment: Jobless Recovery Again?

-1500

-1000

-500

0

500

1000

Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08

0

1

2

3

4

5

6

7

8

9

10Change from previous month (Thousands)

Job Change(Left Scale)

Unemployment Rate(Right Scale)


Change in Payroll Employment and Unemployment Rate

Percent

125,000125,000


“Jobless recovery” is not good news for rural Kentucky

• Kentucky’s 85,000 farms are dependent on off-farm jobs.

• >35,000 principal operators worked 200+ days off the farm.

• Current KY unemployment rate = 11%.

• About 3,000 - 6,000 “commercial farms” which account for 74% of all agricultural gross receipts.


Percent change from a year ago

-3.0

-2.0

-1.0

0.0

1.0

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0.0

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2.5

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3.5

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4.5

5.0

Inflation disappears as an economic issue

Core CPI

CPI: All Items


Consumer Price IndexCPI: All Items Core CPI


Two of the reasons inflation is low…


Two of the reasons inflation is low…


U.S. economic outlook for 2010U.S. economic outlook for 2010 ►Slow growth for U.S. & KY. Recession may be “over” but we face jobless recovery.

►Financial system appears stabilized and housing prices have begun recovery.

►Face serious debt service issues that will be drag on economic growth as interest rates rise.


U.S. Agriculture in a Chaotic EconomyU.S. Agriculture in a Chaotic Economy


U.S. Net Farm IncomeMajor decline as prices & exports drop but costs rise

0

20

40

60

80

100Billion Dollars

Net Farm Income Govt PaymentsSource: ERS/USDA

*

*estimated

’00-’09 average: $63 B -38%


U.S. Agricultural TradeSituation as of Fall 2008…

-100

-50

0

50

100

150

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08p '09

Exports Imports Trade Balance

Billion $

Source: USDA, ERS; fiscal year ending 9/30; p = preliminary

?


U.S. Agricultural Trade1999-2010

-100-80-60-40-20

020406080

100120

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09p'10f

Exports Imports Trade Balance

Billion $

Source: USDA, ERS; fiscal year ending 9/30; p = preliminary f = forecast

▪Lower grain prices & volumes = 2/3 of drop in exports

▪ Exports stabilize in ’10 as dollar weakens, global economy improves

▪Food imports return to record-high as economy recovers

▪Trade surplus only $15B


KY Cash Receipts and Net IncomeRecord high in 2008; sharp drop for 2009

0

1

2

3

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6

Cash Receipts

Net Farm Income

$1.37B

$ billion

$3.93B


22.30%

19%13.50%

11.90%

7.90%

7.70%

Horses

Poultry

Corn

Cattle

Soybeans

Tobacco

Big 6 = 82% Cash Sales, ‘08


Lower farm income affects land prices

Source: USDA, NASS


Lower farm income affects land prices

Source: USDA, NASS

Agent Survey 2008


Climb in land values stops (pauses?)

Source: USDA, NASS


Farm Balance Sheet Strong

Source: USDA, ERS


• Impact of global recession on agriculture now clear – lower exports, prices & income.

• Global recovery holds promise for improved environment in 2010.

• KY agriculture will continue to feel the recession-like conditions into 2010.

Documents

Agricultural Economics Economic Outlook 2010 Craig Infanger October 2009