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Agriculture Flexes Economic Muscle in Rural America

posted on September 3, 2010

Hello, I'm Mark Pearson. U.S. unemployment rose in August for the first time in four months as weak hiring by private employers failed to offset a hefty increase in the number of people looking for work.

According to the Labor Department, U.S. companies added a net total of 67,000 new jobs last month. That's down from July's upwardly revised tally of 107,000 and it pushed the national unemployment rate up to 9.6 percent from July's reading of 9.5 percent.

Still, the pace of private employer hiring, though weak, was not as bad as many economists had expected and the Dow Jones Industrials snapped a 3-week losing streak Friday with a gain of 128 points.

The rally was supported earlier in the week when the Institute for Supply Management announced its Manufacturing Index rose to 56.3 in August from 55.5 in July. Any reading above 50 indicates growth.

And the New York-based Conference Board reports its Consumer Confidence Index rose to 53.5 in August.

One sector of the economy where confidence is growing is agriculture. And powered by strong foreign demand, net farm income is on the rise.

Agriculture Flexes Economic Muscle in Rural America

As troubling signals in the broader economy continue to grab headlines across the country, much more positive financial figures are emerging in farm country.

The Agriculture Department released a swath of data this week including some positive numbers on U.S. agricultural exports.

According to USDA, America will ship $107.5 billion worth of agricultural products abroad in the fiscal year ending September 30. That's the second-highest export figures ever recorded… lagging behind only the 2008 record of $115.3 billion in exports.

Jason R. Henderson, Omaha Branch Executive, Federal Reserve Bank of Kansas City: "Right now I think the biggest areas of growth are East Asia with rising standards of living and rising populations. In 2010, coming off the recession we've seen a jump in exports in feed this demand in Asia with a rising middle class."

Jason Henderson, vice president of the Omaha branch of the Federal Reserve Bank of Kansas City, says the bullish figures portend a sustained economic boost from grain and meat sectors.

Jason R. Henderson, Federal Reserve Bank of Kansas City: "In the short term, wheat is leading the charge. We've had the situation in Russia. At the beginning of the year we we're worried about what we would do with wheat – that's changed. We are seeing a rebound in protein exports. Even dairy products have rebounded. When you think economic conditions are going to improve people buy more protein."

According to additional USDA data released this week, net farm income will increase to $77.1 billion in 2010, up nearly 25 percent from last year.

USDA Secretary Tom Vilsack trumpeted the reports, claiming the efforts of the Obama Administration's Recovery Act and Global Export Initiative as well as the resilience of American farmers and ranchers have boosted the farm economy.

In a post on the White House website, Vilsack noted: "We are pursuing a new trade strategy which looks at nations based on the nature of their marketplace. We have worked hard to negotiate the removal of barriers to exporting pork, poultry and other products. And we have pursued an international trading system with rules based on the best available science to ensure that U.S. agricultural producers have fair access to foreign markets."

Strong international trade figures were countered, this week, by a mixed report from a team of Midwestern economists. Creighton University's Rural Main street index, or RMI, is a survey of bank presidents and company CEOs in 10 Midwestern states. August figures dipped below the growth-neutral scale of 50 for the second consecutive month...

Despite a generally positive outlook for agriculture, an RMI of 46 is an unwelcome development in some regions that rely on other sectors to insulate rural communities from the chill of economic turmoil.

Ernie Goss, Economist, Creighton University: "It was not a good report. The bank CEOs see the businesses on Main street not doing that well. On the flip side, banks are doing well and the farms are doing well. Agricultural commodity prices are doing well and farmers are doing reasonably well. But the businesses on Main street are not. Business picked up earlier this year but around May we began seeing real skids on Main street."

Ernie Goss, Economist, Creighton University: "We're getting mixed messages. The bank CEOs are being told by Washington to lend more. Then they are being told by regulators to scrutinize loans. So the banks are scrutinizing these loans and slowing credit."

Ernie Goss, lead economist for the RMI and a other rural economic projects, emphasizes the undervalued dollar will play a crucial role in the months ahead.

Ernie Goss, Economist, Creighton University: "We need to see a cheaper dollar because that makes U.S. goods cheaper abroad. That's been good for agricultural products. As long as we don't get a rebound in the value of the dollar the outlook for agriculture looks good."

Goss also stressed the outcome of Congressional tinkering on tax policy -- particularly as it relates to the so-called, Bush tax cuts -- could dramatically affect the nation's economic outlook.

Ernie Goss, Economist, Creighton University: "The tax cuts need to be extended or we are back in the recession. Our surveys say no to a double-dip recession but this is no time to be raising taxes on anybody."


Tags: agriculture economy money news rural trade