member education
A Global Message for Local Success
By Mark Parker
The products grown on Missouri farms connect the people who produce them with the other 7.3 billion
people on the planet — and that connection has a bottom line impact for FCS Financial customers.
At FCS Financial’s Commercial Farmer Symposium, it became clear that global politics, economics, and even diets,
impact the financial well-being of every Missouri farm.
Among the event’s nationally
known speakers, Dr. Jason
Henderson, Associate Dean in the
College of
Agriculture
and
Director of
Extension
at Purdue
University,
shared his
Dr. Jason Henderson
insights on
the global macro-economic trends
affecting production agriculture.
American farmers are great at
responding to economic signals
to increase production, he noted.
Today, agricultural producers are
hearing about a growing world
population and the demand for
more protein in the diets of the
emerging economies.
“But didn’t we hear that in the
‘70s?” Henderson asked a crowd
of more than 300 farm folks. “We
called it planting fence row to
fence row.”
The economist cautioned that,
while long-term prospects are
strong, current conditions demand
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HEARTBEAT | SUMMER 2015
vigilant financial management and
a constant eye on what’s happening
with overseas customers.
Today’s situation contrasts a
strengthening U.S. economy with
a significant growth slow-down
in China and a sluggish Eurozone
economy. The Federal Reserve
expects the U.S. to achieve a
“normal rate of unemployment”
of 5.2 to 5.5 percent in 2015 with
an improved GDP growth of 3.3
percent compared to European
growth of about 1.1 percent.
China, where $1 in every $5
of U.S. exports go, has enjoyed a
robust economy for a decade with
10 percent annual growth. That
rate is projected to drop to 7.7
percent for 2015 as U.S. exports to
China have been flat for the past
two years.
“The challenge for
agriculture,” Henderson said,
referring to the export outlook, “is
long-term strength but short-term
weakness.”
Along with an export plateau,
the former Federal Reserve
economist noted that ethanol — a
major driver in the recent super
cycle — now faces challenges.
Because it is a government-driven
market, ethanol is vulnerable to
politics. Additionally, reduced fuel
consumption during the recent
recession and lower energy prices
have resulted in excess production
capacity.
“And we’ve had big (corn)
supplies,” Henderson said. “It all
comes down to lower prices.”
Since 1975, the U.S. crop
sector has experienced two
downturns, 1981-1996 and 19972002. Those past cycles suggest a
5-year slump in corn profits with a
similar outlook for other crops, he
said.
On the other hand, Henderson
noted that hog and cattle prices
are expected to remain strong in
the near-term. He did pose two
caveats for a bright livestock price
picture. First, it remains to be
seen how consumer demand will
be affected by continually higher
meat prices. Second, the rate at
which producers expand to take
advantage of profit opportunities