Two Texas A&M Researchers see positive implications in the future of the agricultural economy.
Click to hear WTAW’s Chelsea Wade explain:
Press Release from Texas A&M University
BRYAN – A Texas AgriLife Research economist told a group of farmers and ranchers he’s optimistic about the future of the agricultural economy and the general economy as a whole.
Dr. Charlie Hall, who also is the Ellison Chair in International Floriculture at Texas A&M University, said at the 2009 Texas Plant Protection Conference recently in Bryan that the economic recovery is going to be slow, “but that’s a good thing.”
Current economic concerns include the global financial situation, auto industry, energy consumption and overall U.S. infrastructure, he said, adding the U.S. labor situation is improving as weekly unemployment claims are declining.
“Core inflation has remained stable at around 1.5 percent excluding food and energy,” Hall said.
The housing crisis has bottomed out as California and Florida have had
14 consecutives months of increased numbers in purchased/sold homes, he said. This data has a direct effect on consumer purchasing.
“I think we as consumers will save a little bit more, but that does not mean we will stop spending altogether.”
He said that the national definition of the savings rate doesn’t include two things: appreciation of home and 401(k) retirement accounts.
“I think the Great Recession has prompted people to be more frugal and temporarily increase the savings rate. In terms of the long run, spending is too ingrained in the mindset of the consumer, but they will exhibit a smarter consumption pattern.”
Hall said prices for agricultural commodities have increased, but farm-related expenditures have increased as well. For the 2007-2008 period, agriculture net farm income was $87 billion. In 2009, that slid to $57 billion in net farm income. However, five of the most profitable years for agriculture have been from 2000-2008.
Looking ahead, Hall said fuel prices heading into the spring could reach
$2.75 a gallon.
“Natural gas is at an all-time low. Many farmers are buying on the spot market instead of buying futures.”
He projects by summer 2010, gasoline prices will still be in $2.60 to
$2.65 per gallon range.
Hall wrapped up his presentation emphasizing that the economic recovery will be slow.
“We need to grow smarter this time, preventing asset bubbles from developing in the first place,” he advised producers. “Lastly, as producers within agriculture, you’ve got to be prepared for the recovery.”
He said there was a 15 percent drop in the number of producers in the horticulture field from a year ago.
“That land, equipment, employee and customer base has to go somewhere,”
he said, which creates opportunities for producers to expand their business for “cents on the dollar” or hire newly unemployed, talented workers.
“We’ve got to be thinking about those types of opportunities,” he said.
“We have to be smart in capturing those opportunities that are out there, particularly in times of economic recovery. Now is the time to be progressive-minded.”
Meanwhile, change has come to Washington and it’s affecting agriculture in a big way, said Bob Stallman, president of the American Farm Bureau Federation during his keynote address at the conference.
Stallman said proposed climate change legislation will have negative effects on agriculture.
“The climate change bill is negatively affecting farmers, further squeezing our profits in production agriculture,” he said. “Change has come in D.C. and things are different than they have been in the past.
The attitude is not all that positive for modern agriculture.”
Stallman said a mandatory cap and trade system on high-carbon fuels, such as oil and coal, would restrict those fuel sources.
“The theory is, and proponents would like you to believe, the development of solar and wind energy will fill the gap. There’s been a lot of happy talk, leading one to believe this would be good, but it will lead to higher energy prices. This is being touted as a positive for U.S. agriculture. What they don’t tell you is what will happen to energy costs.”
He said this creates an artificial cap on the use of fuels that we have now and replace that with wind and solar energy.
“What happens if they are not replaced?” he asked.
Landowners, whether they are farmers or not, will have to make decisions on whether to plant trees or produce a food crop.
Stallman cited research done by Dr. Bruce McCarl, Texas AgriLife Research economist and Nobel Peace Prize recipient, in the area of carbon capture in agriculture.
“It’s predicted 40 million acres in cropland will be planted in trees, downsizing agriculture 20 percent,” Stallman said. “By 2050, we will need 70 percent more food on current cropland. This doesn’t sound like a good plan for us, so we are opposing this.”
GRAIN MARKETS IN 2010
BRYAN