October 10, 2001 | By: Haven Miller
LEXINGTON, KY.

With the national economy facing recession, not all the news is bad. Interest rates are headed down and inflation is still in check. But whatever impacts the larger economy also impacts agriculture, and that means recession spells economic uncertainty for farmers.

“Farmers are consumers just like the rest of us, so when things start to sour farmers are susceptible just like the rest of us,” said Larry Jones, agricultural economist in the University of Kentucky College of Agriculture. “We know in Kentucky that about 60 percent of our farmers work off farm, so if an economic recession threatens the loss of jobs, that can mean the loss of income and medical benefits to farmers. Perhaps more important, it is estimated that more than 90 percent of Kentucky farm family income is earned off-farm. “

Jones said the economy has slowed markedly during 2001. The events of Sept. 11, which resulted in 60 billion dollars worth of destruction and lost output, have added to the uncertainty. Unemployment is rising, corporate profits are falling, and consumer confidence has declined. There is still reason for optimism, however.

“With interest rates falling, farmers will be able to borrow money more cheaply,” Jones said. “Also, the high fertilizer and fuel prices farmers got hit with last year seem to be showing signs of backing off, in part because of the recession.”

One area of particular concern to agriculture is the future of the federal budget surplus. Last year, economists anticipated a surplus of two trillion dollars over the next 10 years. But recent events now put that surplus projection in doubt.

“The surplus is one of the reasons our government has been able to provide payments totalling between 20 and 30 billion dollars to help out U.S. farmers,” said Greg Ibendahl, UK agricultural economist. “But as you know, the recession and the terrorist attacks have caused the airline industry and others to ask for government money. If that happens, we don’t know what kind of share will be left for farmers.”

Ibendahl and Jones said the major factor to monitor during 2002 is the consumer confidence level. No one can predict how quickly U.S. consumers will return to the market place and help spur economic recovery.

Contact: 

Greg Ibendahl 859-257-3616