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Economist Tells Congress Farm Economy Is Tied To Overall Economy

published: April 5th 2010
by: Georgia Gustin
source: St. Louis Post-Dispatch

ST. LOUIS — University of Missouri farm economists recently told Congress  that they expect the agricultural economy to pick up — that is, if the general economy continues to do the same.
 "The biggest point we’re making is that the health of the farm economy depends on the health of the larger economy," said Pat Westhoff, co-director of the Food and Agricultural Policy Research Institute at MU.
 The institute’s annual report, which MU researchers have released for the past 25 years, predicted that the U.S. farm economy, which lost $30 billion last year, will spring back by about $10 billion. But, Westhoff said, "That depends on people being able to spend some money."
 Farm income is predicted to rise over the next two years, mostly because growing global demand for meat will boost livestock prices. But, the report says, that rise depends on several variables — particularly energy costs, which affects the price of grain.
 Pork producers, who have been losing money for more than a year, could break even this year — but that, too, depends on the global appetite for pork.
 Dairy producers, who also had a disastrous 2009, could see some recovery as world dairy prices climb.
 Consumers will likely see higher prices in the grocery store as farm income improves, but food inflation will not reach the escalated levels of 2007 and 2008 when it peaked at 5.5 percent, according to the report. Last year, food inflation hit 1.8 percent.
 While corn won’t reach the peak prices of 2008, demand for biofuels will continue to support prices, the report said. Westhoff explained that foreign demand for corn-based animal feed and ethanol mandates continue to use larger portions of the U.S. corn crop. Federal mandates require increasing ethanol use until 2015. Beyond that, corn prices will depend largely on oil prices, Westhoff said.
 The report is delivered annually to the agriculture committees in both the House of Representatives and the Senate.
 The FAPRI report comes on the heels of a U.S. Department of Agriculture analysis that predicted a similar picture for the farm economy.
 "The degree of uncertainty is deeper than normal," Westhoff said.