2008 Will be Sluggish

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 struggling U.S. and slowing global economies. Sluggish is the word for 2008.

With the passage of the energy mandate, it appears that Washington, D.C., has given the okay for those producing energy to go full steam ahead. This, in turn, is going to result in higher input costs for livestock producers and possibly higher food costs for consumers.

THE WILD CARD in this area will be weather. Any aberration in rainfall in major production areas 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.

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. (A black swan is a highly improbable event that subsequently seems mainstream, such as the 9/11 disaster.)

Dave Kohl, PhD., Corn & Soybean Digest Trends Editor, is Professor Emeritus at Virginia Tech. He's published four books and over 500 articles on financial and business topics. You can reach him at sullylab@vt.edu.