LARRY D. SANDERS

M A R C H 2 0 1 1D E PA RT M E N T

O F A G R I C U LT U R A L

E C O N O M I C SO K L A H O M A

S TAT E U N I V ER S I T Y

On the edge for better or worse?Status of the General Economy

2

Outline of presentation

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 billOverview of macroeconomic status

3

3

Ag Industry, Agribusiness, Rural America

Global Markets

Jobs

Energy

Federal Budget

Capital

Macroeconomy & agriculture--linkages

4

Jobs & the economy…

Jobs: http://tipstrategies.com/archive/geography-of-jobs/

http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

5

How the economy works… 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 …

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The general economy…

7

US economic activity, GDP, 1980-2011

http://www.economagic.com/em-cgi/charter.exe/var/rgdp-qtrchg

The Economy, Politics and Perception

Source: US Bureau of Economic Analysis, 2009 (www.bea.gov) 8

US Budget Surplus/Deficit ($bil.)

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

-1600

-1400

-1200

-1000

-800

-600

-400

-200

0

200

400

-330-225-177

-151-50

70124232

268

-157.8-374

-413-331-314-162

-455

-1400-1500

-1300

http://zfacts.com/p/461.html

9

Investment in economy by business…

10http://www.sjsu.edu/faculty/watkins/USecon10.htm#INVEST

11

12

http://www.census.gov/cgi-bin/briefroom/BriefRm

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Trade & net exports…

http://www.tradingeconomics.com/Economics/Balance-of-Trade.aspx?Symbol=USD

US Ag Trade Balance ($mil/fy)

0

20000

40000

60000

80000

100000

120000

140000

160000

IMPORTS EXPORTS

$135.5 b.Exp.

$88 b.Imp.

US Agricultural Trade Balance, 1991-2010

($mil/FY; agricultural product only)

0

20000

40000

60000

80000

100000

120000

140000

160000

IMPORTS EXPORTS

WTO

NAFTA

FAIR96

FSRIA02

$135.5 b.Exp.

$88 b.Imp.

$47.5 b.surplus

FCEA08

1935

1938

1941

1944

1947

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

f0

20

40

60

80

100

120

140

IMPORTSEXPORTS

US Agricultural Trade Balance, 1935-2010f

($bil/FY; agricultural product only)*

http://research.stlouisfed.org/fred2/graph/?id=DTWEXM,

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What to look for as economy improves or …

19http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=USD

•Inflation not a general near term issue.•But… begin to plan contingencies• Borrowing cut 10-20%?• Fuel/fertilizer/feed costs

hi/higher?

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If no double-dip recession:Unemployment returns at slow paceThis will lift consumptionThat will increase tax revenue & cut Federal

budget deficit

21http://www.businessinsider.com/chart-of-the-day-percent-job-losses-in-post-wwii-recessions-2011-3?utm_source=Triggermail&utm_medium=email&utm_term=Clusterstock+Chart+Of+The+Day&utm_campaign=Clusterstock_COTD_030411

Net Farm Income & Direct Government Payments (1991-2011f)

020406080

100

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

net farm income

govt payments

NFI-G

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$ BillionFSRIA 2002

$94.7 b.

$10.6 b.

$84.1 b.

FCEA 2008

Mixed signals in the general economy…

State & local budget woesFederal budget deficit

woesUS slow growth expected

thru 2012US unemployment slowly

fallingThe Fed not ready to raise

interest rates Wages remain flatConsumer spending

continues to improveUS agricultural trade

continues to improve Fuel & Food prices high

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Afterthoughts …

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 larry.sanders@okstate.edu 405-744-9834

 

C

2011

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Appendix

A tax is a tax, but …High food prices …High fuel prices …Who owns our public debt …The long term debt …Global population growth …

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A tax is a tax, but …

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Budget Issues - States That Get More in Fed Subsidies Than Pay in Federal Taxes

http://voices.washingtonpost.com/ezra-klein/2010/04/the_red_state_ripoff.html

31

32

High food prices …

33http://www.businessinsider.com/chart-of-the-day-un-food-price-index-2010-12

34

35

http://agcompetitiveness.blogspot.com/2011/03/corn-energy-food-and-some-thoughts-on.html

36

Who owns our public debt …

37http://www.businessinsider.com/chart-of-the-day-federal-debt-held-by-the-public-2010-8

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Who own US debt (2008)?

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%Oil exporters 173.9 6.50%

Grand Total 2.6764 tril.

Total debt: $10 tril.(foreign 26%)(other public 22%)(Fed, intragovt 52%)

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40

High fuel prices …

41http://www.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D

42http://www.eia.doe.gov/dnav/ng/hist/rngc1d.htm

43http://www.eia.gov/forecasts/aeo/early_prices.cfm

44

The long term debt …

45http://www.businessinsider.com/chart-of-the-day-bush-policies-deficits-2010-6?utm_source=Triggermail&utm_medium=email&utm_campaign=CS_COTD_063010

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http://www.businessinsider.com/chart-of-the-day-debt-commision-deficit-projections-2010-12?utm_source=Triggermail&utm_medium=email&utm_term=Clusterstock+Chart+Of+The+Day&utm_campaign=Clusterstock_COTD_120910

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Global population growth …

48http://www.imf.org/external/pubs/ft/fandd/2006/09/picture.htm

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50

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