Fiscal crisis will impact agriculture
Dec 24, 2008 11:12 AM,
By Harry Cline
Farm Press Editorial Staff
Now that everyone can legally utter the 'r' word — recession — the big question now is how long will it last.
John Penson, regents professor and Stiles Professor of Agriculture at Texas A&M University does not believe it will be the 43-month Great Depression variety, but more like the 16-month 1981-1982 type.
Penson made his prediction during a keynote address at the 27th Annual Agribusiness Management Conference held in Fresno, Calif., this fall, sponsored by California State University, Fresno and Bank of America.
The recession of the early 1980s was caused by an oil crisis. This one, which now impacts the world and the U.S., is attributed to multiple factors revolving around the U.S. housing industry and a worldwide credit crisis.
Penson predicts the current recession will last until at least early 2010. ”It is a global recession. We cannot export our way out of it,” he notes.
Agriculture has had little to do with the crisis, but Penson said agriculture will pay a price because of it for the next two years.
Agriculture goes into the 2009 crop year in relatively good cash shape after a season of record high commodity prices.
However, interest availability will be tight as a result of the overall credit/housing crisis. Rates likely will increase as a result of inflation caused by the huge fiscal bailouts for other industries. Inflation and the cost of oil — which Penson says will start going back up eventually — will contribute to added production expenses.
The other part of the bad news for agriculture relying on exports is that the dollar will likely strengthen.
Fortunately, Penson says about two-thirds of the nation’s farmers have no long-term debt. If a farmer does have long-term debt, it is a safe investment to pay it off in order to better weather what likely will be tumultuous 2009 and 2010 production seasons.
Land values that have seen double digit increases in recent years will fall back and may decline in 2009.
Penson says agriculture overall will be “stressed” going into the new crop year, but it certainly does not face as dismal a future as some other industries.
email: hcline@farmpress.com
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