Others Could Take a Lesson from U.S. Ag
Economic upheaval has brought asset bubbles to the forefront, especially with a sluggish housing market and persistent foreclosure rates. U.S. agriculture, however, has managed to escape the brunt of the economic downturn, prompting some to wonder whether it might be the next sector to watch for a asset bubble.
Federal Deposit Insurance Corporation chair Sheila Bair recently raised the issue, noting that the more than 1,500 rural banks in the U.S. could be negatively affected if the “positive fundamentals” in the booming agricultural sector suddenly reversed.
“While the credit structure underlying U.S. farmland does not appear to involve excessive leverage or inappropriate loan products, this is a situation that will continue to require close monitoring,” she said.
In an interview just after Bair made her remarks, we asked USDA Secretary Tom Vilsack if he saw the potential for a U.S. agriculture asset bubble.
“This is a much different circumstance than some of the other bubbles that we’ve seen in the economy,”
Vilsack said. “In the 1980s, the farm crisis hit American agriculture very hard. People were overextended. Farmers learned a painful lesson, but they learned it and they learned it well. The debt-to-asset ratio today is very, very strong.”
Vilsack said rising farm income projections are due in part to strong U.S. farm exports, which are expected to continue in 2011. “I think the dyna-mics are much different than they were 20 or 30 years ago and certainly much different than in other aspects of the economy. There’s very little debt in farm country. We have never forgotten that lesson,” he said.
Vilsack expressed the hope that others will learn from what agri-culture went through in the 1980s. “Farm country is a wonderful example to the rest of the country in terms of how we can revitalize the rural economy and the American economy generally,” he said. “If you focus on less debt, increased productivity and exports, you’ve got a formula for growing an economy. ”
Lucky Project Fresh Start Winner
More than 100 entries spanning 15 states poured in for Project Fresh Start. The Precision Planting pit crew will soon pick up the winning machine and refurbish it from hitch pin to closing wheels.
It was Robin Goessling’s nomination for her son, Luke, that rose to the top. The Whitewater, Wis., family has dealt with many hardships, but the most difficult was the sudden death of the father of the family, Ralph, on New Year’s Eve 2009.
In 1996, Ralph bought “Maria,” a John Deere 1780 12/23 row planter. The name stems from the Brooks & Dunn song “My Maria,” which was playing on the truck radio when Robin was videotaping Ralph using the planter for the first time.
The 2010 season was Luke’s first time farming by himself. In 2011, Maria will be completely overhauled by Precision Planting. We will follow the machine through the process and into the field this spring.