The vice president of the Federal Reserve Bank of Kansas City believes the agricultural economy should stay in a growth period for at least another year.
Jason Henderson says he sees comparisons between today and the boom times of the 1970s.
“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.”
He says one of the primary differences between now and the 1970s 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 today,” Henderson says.
Speaking at an ag economics conference in Sioux City, Iowa, Henderson says the general economy will likely remain stagnant until unemployment goes down.
He says the ag economy has given some support to the general economy, particularly in the Midwest, which has the strongest employment growth, lowest unemployment rates, and the strongest income gains of any region of the country.
“I think going forward, what you’re going to see is 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 the debt and that of what we have been accumulating here recently,” Henderson says.
He 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.
Dennis Morrice, KLEM, Le Mars