2010 should hold a bright spot on the economic horizon, according to Jason Henderson, vice president and Omaha branch executive for the Federal Reserve Bank of Kansas City.
"We're in an unprecedented time; we've come through a period that we haven't experienced for decades,” he says. "And I think we are in a recovery.”
The downside, Henderson says, is that it's not going to feel like it, because more jobs won't be added for a while.
"What we've seen in the recession is a complete slowdown in the number of hirings,” he says. The U.S. saw an increase in separations, or firing, but that is starting to slow down. "The challenge isn't the layoffs; it is the lack of companies that are hiring.”
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These high levels of unemployment have a direct correlation to the amount of high-priced proteins, such as beef, which are purchased.
"What we've seen over the last year and a half is that people aren't eating steak at restaurants, they are eating Hamburger Helper at home,” Henderson says. "They have shrunk their budgets for food consumption, so they can cover other costs. Going forward, we should see this recover.”
Agriculture: The Shining Star
Henderson says that even among these challenges, some opportunities exist for agriculture. "We have not seen a dramatic decline in commercial bank lending to agriculture,” he says. "In terms of agricultural banks, the best part of their portfolio is agriculture.”
Henderson says banks only make money when they make loans.
Yet, even though the funding is there, he says, your bankers are probably going to be asked a lot more questions. These questions could include:
- What is your risk management strategy?
- What is your income projection?
- Can I see your balance sheet?
Overall, Henderson says, debt is at relatively low levels for farmers. The real question is what farmers will do with the debt they have.
Henderson spoke during the Food and Agricultural Policy & Research (FAPRI) Missouri Agriculture Outlook Conference, held in Jefferson City, Mo.
For More Information
Current Credit Conditions And New Standards
Jason Henderson, Federal Reserve Bank of Kansas City-Omaha Branch (presentation from the 2010 Top Producer Seminar)