Transcript The General Economy, Political Change & the Next Farm Bill

On the edge for better or worse?
Status of the General Economy
LARRY D.
SANDERS
MARCH 2011
DEPARTMENT
OF
AGRICULTURAL
ECONOMICS
OKLAHOMA
STATE
UNIVERSITY
Outline of presentation
2
 Bottom line of links between macroeconomy &
rural/agricultural well-being



Macroeconomy & agriculture
Macroeconomic status & congressionl constraints—budget &
size of govt
Timeline & budgetary resource constraints for next farm bill
 Overview of macroeconomic status
Macroeconomy & agriculture--linkages
3
Federal Budget
Global Markets
Jobs
Ag Industry,
Agribusiness,
Rural America
Capital
Energy
3
Jobs & the economy…
4
 Jobs:
 http://tipstrategies.com/archive/geography-of-jobs/

http://cohort11.americanobserver.net/latoyaegwuekwe/mult
imediafinal.html
How the economy works…
5
 Output = Consumption +
Investment + Govt. spending
+ Net exports
Consumption is
improving but still
down
 Investment is improving
but still down…
 Net exports up but still
negative…
 Government spending is
propping up the
economy, but …

The general economy…
6
US economic activity, GDP, 1980-2011
7
http://www.economagic.com/em-cgi/charter.exe/var/rgdp-qtrchg
The Economy, Politics and Perception
US Budget Surplus/Deficit ($bil.)
400
200
0
-50
-151
-225-177
-330
-200
-400
70
124232
268
-157.8
-162
-314
-374
-331
-413
-455
-600
-800
-1000
-1200
-1300
-1400
2011
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
Source: US Bureau of Economic Analysis,
2009 (www.bea.gov)
2010
-1400
-1500
-1600
8
http://zfacts.com/p/461.html
Investment in economy by business…
9
http://www.sjsu.edu/faculty/watkins/USecon10.htm#INVEST
10
11
http://www.census.gov/cgibin/briefroom/BriefRm
12
Trade & net exports…
13
US Ag Trade Balance ($mil/fy)
160000
$135.5 b.
Exp.
140000
120000
$88 b.
Imp.
100000
80000
60000
40000
20000
0
IMPORTS
http://www.tradingeconomics.com/Economics/Balance-ofTrade.aspx?Symbol=USD
EXPORTS
US Agricultural Trade Balance,
1991-2010
($mil/FY; agricultural product only)
160000
140000
120000
100000
W
N T F
A O A
I
F
T
A
F
S
R
I
A
0
2
R
9
6
80000
60000
40000
20000
0
IMPORTS
EXPORTS
F
C
E
A
0
8
$135.5 b.
Exp.
$47.5 b.
surplus
$88 b.
Imp.
1935
1937
1939
1941
1943
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
19991
1993
1995
1997
1999
2001
2003
2005
2007
2009
US Agricultural Trade Balance, 1935-2010f
($bil/FY; agricultural product only)*
140
120
100
80
60
IMPORTS
EXPORTS
40
20
0
http://research.stlouisfed.org/fred2/graph/?id=DTWEXM,
What to look for as economy improves or …
18
•Inflation not a general near term issue.
•But… begin to plan contingencies
•Borrowing cut 10-20%?
•Fuel/fertilizer/feed costs hi/higher?
19http://www.tradingeconomics.com/Economics/InflationCPI.aspx?Symbol=USD
If no double-dip recession:
Unemployment returns at slow pace
This will lift consumption
That will increase tax revenue & cut Federal
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budget deficit
http://www.businessinsider.com/chart-of-the-day-percent-job-losses-in-post-wwii-recessions-201121
3?utm_source=Triggermail&utm_medium=email&utm_term=Clusterstock+Chart+Of+The+Day&utm_campaig
Net Farm Income & Direct Government Payments
(1991-2011f)
24
FCEA
2008
FSRIA
2002
$ Billion
net farm income
100
$94.7 b.
govt payments
80
$84.1 b.
NFI-G
60
40
20
$10.6 b.
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
0
24
Mixed signals in the general economy…
25
 State & local budget woes
 Federal budget deficit woes
 US slow growth expected






thru 2012
US unemployment slowly
falling
The Fed not ready to raise
interest rates
Wages remain flat
Consumer spending
continues to improve
US agricultural trade
continues to improve
Fuel & Food prices high
Afterthoughts …
26
 A “perfect storm” brewing to open the debate over the next farm bill:



Record hi net income predicted this yr
Record hi exports predicted this yr
Record hi food/commodity prices predicted

 “Good news” for producers?


Input prices are going up
Anti-ag program groups will use to say farmers don’t need tax payers
money any more; “the market is taking care of them”

 “the cure for hi prices is hi prices”
 Volatility in oil prices could last longer
 Weather patterns, esp. precipitation, have returned to more volatile
patterns than during the 1980-2000 period
 Risk management remains the single most important planning tool for
producers
 With cuts at fed level & cuts at state level, local economies have yet to
see the worst
Thanks for your attention!
27
 Larry Sanders
 [email protected]
 405-744-9834
C
2
0
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Appendix
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 A tax is a tax, but …
 High food prices …
 High fuel prices …
 Who owns our public debt …
 The long term debt …
 Global population growth …
A tax is a tax, but …
29
Budget Issues - States That Get More in Fed
Subsidies Than Pay in Federal Taxes
30
http://voices.washingtonpost.com/ezraklein/2010/04/the_red_state_ripoff.html
31
High food prices …
32
http://www.businessinsider.com/chart-of33
the-day-un-food-price-index-2010-12
34
http://agcompetitiveness.blogspot.com/20
11/03/corn-energy-food-and-some35
thoughts-on.html
Who owns our public debt …
36
37
http://www.businessinsider.com/chart-of-the-day-federal-debt-held-by-the-public-2010-8
Who own US debt (2008)?
Total debt: $10 tril.
(foreign 26%)
(other public 22%)
(Fed, intragovt 52%)
Grand Total 2.6764 tril.
Foreign owners of US Treasury Securities (July 2008)
Nation
billions of dollars
percentage
Japan
593.4
22.17%
Mainland China
518.7
19.38%
United Kingdom
290.8
10.87%
173.9
6.50%
Oil exporters
38
39
High fuel prices …
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http://www.eia.doe.gov/dnav/pet/hist/Le
41
afHandler.ashx?n=PET&s=RCLC1&f=D
http://www.eia.doe.gov/dnav/ng/hist/rng
42
c1d.htm
http://www.eia.gov/forecasts/aeo/early_p
43
rices.cfm
The long term debt …
44
http://www.businessinsider.com/chart-of-the-day-bush-policies-deficits-201045
6?utm_source=Triggermail&utm_medium=email&utm_campaign=CS_COTD_063010
46
http://www.businessinsider.com/chart-of-the-day-debt-commision-deficit-projections-201012?utm_source=Triggermail&utm_medium=email&utm_term=Clusterstock+Chart+Of+The+Day&utm_campaign=Clusterst
ock_COTD_120910
Global population growth …
47
http://www.imf.org/external/pubs/ft/fand
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d/2006/09/picture.htm
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50
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