Wow! The holiday season is over and many are ready to hit the ground running for 2008. Personally, I am licking my basketball wounds from the intensive holiday battles at Cassell Coliseum at Virginia Tech. Playing b-ball is still fun, but the court appears to be getting longer each year. Now, on to the outlook…
With the passage of the energy mandate, it appears that Washington, D.C., has given the okay for those producing for energy to go full steam ahead. This, in turn, is going to result in higher input cost for livestock producers and possibly higher food cost for consumers. The wild card in this area will be weather. Any aberration of too much or too little rain in major production areas in the world will create wild fluctuations in cost and prices not seen in decades. Keeping an eye on the weather outlook will be a good strategy in 2008.
Speaking of weather, will the Southeast and parts of the West be hit by back-to-back droughts? This could influence agriculture for up to a decade as producers cash-in assets to avoid losses. Will the urban areas of the East and West experience water shortages? In the past, dry weather has set up on the coast and moved toward the Midwest later in the cycle. Only time will tell.
The economy should be interesting in 2008, an election year. Will the Federal Reserve run out of options and be caught in the trap of stagflation, a stagnant economy with high inflation? Will the housing and credit crunch bring the economy down? Will the slower pace of the U.S. economy impact emerging economies, resulting in a global economic slowdown? My best read on the economy is to expect slightly lower short-term interest rates with a struggling U.S. and slowing global economy. Sluggish is the word for 2008.
Other headlines and challenges for 2008 in the agricultural and rural areas will be:
- The food vs. fuel battle drawn into politics
- Water and natural resource challenges
- Productivity through people as we transition the workforce
- Margin compression for many commodities
- Slowing of land-value appreciation
- Tightening of credit standards
- A record high number of home foreclosures and delinquency on credit cards
- Tremendous opportunities for young people in agriculture
- A widening gap of economic performance in agriculture
- A wild card or black swan event
Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at firstname.lastname@example.org.