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0709PD: Mr. Chairman, Here's the State of the Ag Economy

Published on 24 April 2009

The following comments were made in testimony before the U.S. House of Representatives Subcommittee on General Farm Commodities and Risk Management.

“With confidence in financial markets weakened and the global economy in the worst recession since prior to World War II, the agricultural economy faces much uncertainty. As expected, most aggregate measures are forecast to be down sharply from the record highs reached last year. Concerns with deflationary pressures remain, particularly if lower farm receipts persist over the longer run. This could adversely affect farm real estate values and undermine what has been to date a relatively strong financial position. That said, the outlook is for a return to higher prices as many of the pressures that drove last year’s price increases – high energy prices, the Renewable Fuel Standard, and strong economic growth in emerging markets – will return to play a major role. In addition, while other sectors of the economy may be credit-constrained, many farm lenders appear to be in good financial shape and access to credit for farmers appears to be sufficient.”

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Joseph Glauber
Chief economist, U.S. Department of Agriculture

“The current downturn in the dairy industry has negative spillover effects in the California feed and hay markets as well as support industry services. [...] As one California analyst put it, when the buyer of 75 percent of the hay and feed produced in the state is hurting financially, we have a problem.

“These problems are hopefully cyclical in nature; rain and snow will return to replenish our reservoirs and recharge the ground water; and the economy will recover here and abroad. However, there are elements of the current water crisis and other issues facing California agriculture that involve programs and policies affecting the agricultural economy that persist across market and climate fluctuations.”

Mechel S. Paggi
Director of the Center for Agricultural Business
California Agricultural Technology Institute

“The economic state of the agricultural sector (both farms and ranches and rural areas generally) depends heavily on whether the world economy continues to decline. If confidence is not restored, and the financial systems continue to deteriorate, the agricultural sector will likely suffer the effects on a widespread basis. The success of the stimulus packages and the efforts to stabilize the world’s financial institutions are vitally important to the agricultural sector.”

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Neil E. Harl
Emeritus economics professor
Iowa State University

“The recent record farm income in production agriculture masks the variability experienced by different types of farms. While farm income for crop producers has been buoyed by the rising demand for ethanol, the higher crop prices have put pressure on livestock producers. The extended period of large losses for commercial cattle feeders is without precedent over the last three decades, resulting in a huge equity drain for the industry.”

Troy Dumler
Extension agricultural economist
Kansas State University

“I also retain a fundamental optimism for U.S. agriculture for two additional reasons. I believe there is an inherent and lingering appreciation for the rural lifestyle, the values held by our rural citizenry, and the cultural heritage that exists only in these areas of the country. These are vital components of our culture that no one wants to lose.”

J. Scott Angle
Dean and director College of Agricultural and Environmental Sciences
University of Georgia

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