Utah farmers and ranchers can expect a reversal of fortune in 1991 as agriculture continues a steady economic expansion, defying the recession in the rest of the country, a Federal Reserve economist says.
Mark Drabenstott, assistant vice president and economist at the Federal Reserve Bank of Kansas City, said the farm recovery will persist into the '90s, but at a slightly slower rate."While the general economy slides into a mild recession, agriculture will stand strong," he said.
Even with the recession, farm income will keep climbing, he said. But weak crop prices and a slight decrease in consumer demand will slow growth in 1991 by 5 to 10 percent.
Speaking at a conference sponsored by the Utah State University department of economics and the Utah Bankers Association, Drabenstott said agriculture growth will be limited by high oil prices, weaker crop prices and cautious consumers.
But increases in beef consumption and growth in export markets will turn the tables for the industry, he said.
On a note of caution, Drabenstott said the recent failure of worldwide talks on the General Agreement on Tariffs and Trade may spur a confrontational attitude on exporting U.S. agriculture commodities to Europe.
Drabenstott said the economic outlook is directly tied to the Persian Gulf crisis.
"A serious oil shock alone could turn us into a recession," he said, "while a quick resolution could dampen a slowdown."
Market fears about oil supplies are purely political, he said. The same amount of oil is being produced today as it was before the invasion, he said.
The blue chip consensus is that America is nearing a mild recession, he said. Fourth-quarter economic indicators will show a rise in unemployment and a negative Gross National Product.
Other signs, such as a slow construction starts, cautious consumer spending and cutbacks in industrial production all point to the end of America's longest peacetime expansion, he said.
USU economists also discussed how national developments will affect local commodities in 1991.
- In the dairy industry, USU professor Jay Andersen said large dairy producers have caused a glut in milk production and a downward shift in prices. Milk prices have declined $3 per hundredweight this winter, a time when seasonal increases in consumption generally drive milk prices up. Anderson doesn't foresee a particularly bright year for dairy farmers.
- The livestock industry should continue to see high profits and good profits, especially for cow-calf operations, said Darwin Nielsen, USU economist. With increases in beef consumption, cattle herds will be expanding, he said. Feedlot operators, however, will be operating on tighter margins. A published report that says red meat causes colon cancer might mar an otherwise bright forecast, he said.
The sheep forecast is gloom and doom, especially for wool, as prices are extremely soft due to huge inventories in Australia.
- USU economists Bruce Godfrey and Larry Bond said alfalfa, feed grains and red winter wheat will continue to be soft and stable, with prices dependent on drought conditions in the Midwest.