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Agricultural Economics
Economic Outlook 2010Economic Outlook 2010
Craig Infanger
October 2009
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Agricultural Economics
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Agricultural Economics
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Agricultural Economics
One year after….
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Agricultural Economics
One year after….
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Agricultural Economics
One year after….
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Agricultural Economics
Bailout + Credit Programs + Stimulus = $10T!
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Agricultural Economics
Bailout + Credit Programs + Stimulus = $10T!
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Agricultural Economics
Bailout + Credit Programs + Stimulus = $10T!
U.S. GDP $14.1 TrillionU.S. GDP $14.1 Trillion
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Agricultural Economics
Actual and Projected Federal Budget Surplus and Deficits, FY97-10
Source: CBO
-1600-1400-1200-1000-800-600-400-200
0200400
Fiscal Year
Billions $
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Agricultural Economics
Actual and Projected Federal Budget Surplus and Deficits, FY97-10
Source: CBO
-1600-1400-1200-1000-800-600-400-200
0200400
Fiscal Year
Billions $
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Agricultural Economics
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
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Agricultural Economics
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
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Agricultural Economics
Working our way past “crisis” mode
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Agricultural Economics
Focus shifts to local real estate markets and smaller banks
100100
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Agricultural Economics
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
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Agricultural Economics
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
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Agricultural Economics
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
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Agricultural Economics
What kind of recovery can we expect?
-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
V, U, or W?
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Agricultural Economics
What kind of recovery can we expect?
-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
Square Root?
2% - 3%
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Agricultural Economics
What kind of recovery can we expect?
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Annualized percent change
Quarterly U.S. Real Gross Domestic Product Growth
Source: Bureau of Economic Analysis
Bathtub?
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Agricultural Economics
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)
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
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Agricultural Economics
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)
Source: Bureau of Labor Statistics
Change in Payroll Employment and Unemployment Rate
Percent
125,000125,000
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Agricultural Economics
“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.
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Agricultural Economics
Percent change from a year ago
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Inflation disappears as an economic issue
Core CPI
CPI: All Items
Source: Bureau of Labor Statistics
Consumer Price IndexCPI: All Items Core CPI
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Agricultural Economics
Two of the reasons inflation is low…
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Agricultural Economics
Two of the reasons inflation is low…
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Agricultural Economics
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.
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Agricultural Economics
U.S. Agriculture in a Chaotic EconomyU.S. Agriculture in a Chaotic Economy
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Agricultural Economics
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%
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Agricultural Economics
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
?
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Agricultural Economics
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
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Agricultural Economics
KY Cash Receipts and Net IncomeRecord high in 2008; sharp drop for 2009
0
1
2
3
4
5
6
Cash Receipts
Net Farm Income
$1.37B
$ billion
$3.93B
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Agricultural Economics
22.30%
19%13.50%
11.90%
7.90%
7.70%
Horses
Poultry
Corn
Cattle
Soybeans
Tobacco
Big 6 = 82% Cash Sales, ‘08
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Agricultural Economics
Lower farm income affects land prices
Source: USDA, NASS
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Agricultural Economics
Lower farm income affects land prices
Source: USDA, NASS
Agent Survey 2008
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Agricultural Economics
Climb in land values stops (pauses?)
Source: USDA, NASS
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Agricultural Economics
Farm Balance Sheet Strong
Source: USDA, ERS
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Agricultural Economics
• 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.