The vice president of the Federal Reserve Bank of Kansas City believes the agricultural economy should remain in a growth period for at least another year. Speaking at an agricultural economics conference in Sioux City, Jason Henderson, says he sees comparisons of today to the boom times of the 1970’s.
“You have the low value of the dollar which is supporting U-S agricultural exports overseas, you have stronger growing incomes in global markets, especially developing countries,like China,” Henderson says. “At the same time you have historically low interest rates which are turning record high farm incomes into record high farm values. So there are all of these similarities underpinning the agricultural economy.”
One of the primary differences though between now and the 1970’s, is the level of debt. “In the 1970’s U.S. agriculture leveraged themselves up, quite a bit, and increased the accumulated debt over that decade, and that’s one thing that we haven’t seen yet at this stage in terms of the agricultural boom of today,” Henderson says.
Henderson says the general economy will probably remain stagnant for a while until unemployment goes down. He says the agricultural economy has given some support to the general economy, particularly in the midwest, where there has been the strongest employment growth, lowest unemployment rates, and the strongest income gains of any region of the country.
“I think going forward what you are going to see its going to be more agriculture in terms of its size of the economy will provide some support going forward, and we’ll need to have some stronger growth in terms of the overall broader economy to help stimulate that agricultural demand domestically, and support of our liberties on our debt and that of what we have been accumulating here recently,” Henderson says.
Henderson says government regulations may play a significant role in determining how fast the general economy may rebound. The Federal Reserve Official says he doesn’t see the Board of Governors making many drastic changes to interest rates in the near future.
By Dennis Morrice, KLEM, Le Mars