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The
Fed's Promising and Troubling News
Posted on
Thursday, February 24, 2011 |
 The
Federal Reserve Bank of Kansas City might have well
asked, "do you want the good news or the bad news,"
prior to releasing two recent white papers about the
farm economy.
On one hand, the
Fed bolstered spirits by noting that agriculture has
been in the driver's seat of America's recent economic
recovery. On the other hand, the Fed warned that this
bubble is in danger of bursting, turning a promising
dream into a nightmare not seen since the farm crisis of
the 1980s.
First the good
news.
"In 2010, rural America was at the
forefront of the economic recovery," read the Fed's
white paper titled
"A Rural Rebound in 2010."
"[R]ising exports
of farm commodities and manufactured goods spurred job
growth and income gains in rural communities," the paper
explained. "If recent history holds true, rural America
could lead U.S. economic gains in 2011."
This point has not been lost on
farmers' urban neighbors, who are hungry for jobs. In
fact, the Wall Street Journal noted in an
October article that "growers'
improved lot is rippling out to other
industries."
The Journal further
explained that rebounded commodity prices, in addition
to helping stimulate the economy, have driven down
taxpayer cost for farm policy.
Sounds pretty
promising. So what's the bad news?
According to the Fed's
follow-up white paper,
"Farmers have significantly increased their debt levels
in recent years...the fastest increase since the prelude
to the 1980s farm debt crisis."
Then came the bombshell. "Today's
rising debt raises questions about whether U.S. farm operations will face
financial stress in the future...If farm financial
conditions were to deteriorate rapidly, no producer
would be immune to rising financial stress."
That is sobering news for a
struggling national economy that is dependent on rural
America right now. Especially when you consider that
farm finances do change rapidly because of the
unpredictable nature of Mother Nature and volatile
markets distorted by
foreign subsidies and tariffs.
So what do farmers
have available to help them weather the coming storm?
Not enough, fears
Larry Combest (R-TX), the former Chairman of the House
Agriculture Committee.
"If the bottom
falls out on agriculture, existing farm policy is
already too weakened to prevent a crisis," Combest said.
Couple an already
weakened policy with an onslaught of attacks against
U.S. growers—ranging from environmental zealots, to
onerous regulations, uncertain tax policy, and a World
Trade Organization with an anti-farmer agenda—and the
future is far from certain.
Too bad certainty
is exactly what rural America and a limping U.S. economy
need right now.
Note:
This
article was originally published in The Hand That Feed
U.S. February 2011, and is republished on
ExperienceClovis.com with permission. All rights
reserved.
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Editor &
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