Farm Industry News

Recession time

We're Headed into a severe recession that will last 9 to 16 months, predicts Wells Fargo agricultural economist Michael Swanson. But once the recession clouds disappear, the economy will rebound and a bullish future will emerge, especially for agriculture.

Sound like a fairy tale? Not to Swanson. The well-known economist says the country hasn't been in a recession for 25 years and economies should have cycles. This downturn, apparently, was overdue. Back in the 1950s, '60s and '70s, we used to have more frequent recessions. But Swanson says changes in our economy have been “tamping down” the volatility. A more predictable growth has developed that comes from more capital and improved production, not just more employment.

Unfortunately, the predictable growth encouraged too much risk. Businesses, banks and consumers took on more and more debt in ratio to their assets. Now the scales have tipped too far and the economy is “deleveraging,” Swanson says. Deleveraging includes bankruptcies, and it will be an especially painful period for some of us.

Agriculture also will be hurt by the strengthening U.S. dollar, which makes our agricultural commodities higher priced on the foreign market. Swanson notes that currencies in Canada, Australia and Brazil have devalued 30% against the U.S. dollar in just the past couple of months. “Everything is a two-edged sword,” he says.

But don't despair. Swanson believes U.S. agriculture will thrive in the future as the world's economies pick up again. And as countries grow, their populations want more and better food as well as more transportation and fuel. The U.S. will be a major supplier of these goods.

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