Global demand for farm commodities and higher commodity prices marked the 2011 economy, and additional economic gains are in the picture for 2012. But there is a qualifier on that, and for rural Americans to enjoy continued prosperity, it will depend on how strong the rest of the U.S. economy gets.
The strong economy in rural America pushed ahead in 2011 despite some significant headwinds, say Jason Henderson and Maria Akers of the Omaha Branch of the Kansas City Federal Reserve Bank. Their latest issue of the Main Street Economist http://www.kansascityfed.org/publicat/mse/MSE_0112.pdf identifies those headwinds as rising energy prices, a weak housing market, and tight local and state governmental budgets which put the brakes on growth. The economists say there were a number of pluses, including growth in rural jobs by 1 percent, and a decline in the unemployment rate to a half percent lower than the metropolitan unemployment rate.
The key drivers were record high food prices and fuel exports, which pushed commodity prices higher. But the economists say energy prices, which usually dampen economic growth, were a positive for rural America where oil drilling activity surged providing jobs and economic support. For agriculture, “global food demand boosted exports, straining already tight food supplies. U.S. agricultural exports jumped 18 percent in 2011, reaching record highs. Crop exports rose 21 percent in 2011 due to strong wheat, cotton and grain shipments. On the livestock side, annual red meat and dairy exports soared almost 30 percent while poultry exports rose 17 percent.” The consequence of this demand dropped grain inventories to record lows and prices to record highs:
- Crop exports rose 21 percent in 2011 due to strong wheat, cotton and grain shipments.
- Annual red meat and dairy exports soared almost 30 percent while poultry exports rose 17 percent.
- Corn and wheat prices more than doubled from 2010 to 2011.
- The price of soybeans shot up nearly 50 percent in the same period.
- The inflation-adjusted value of annual crop production rose 13 percent and hit a new high in 2011 despite some drought-reduced yields.
- The annual value of livestock production rose 15 percent from 2010 levels and was the fifth-highest on record after adjusting for inflation.
- As a result of shrinking supplies from herd liquidations, feedlot operators paid escalating prices for feeder cattle.
- Declining poultry production during the second half of 2011 reduced broiler stocks and pushed prices higher at year-end.
- Prices for dairy products rose an additional 24 percent during 2011.
- Real net farm income in 2011 was expected to exceed 2010 levels by 22 percent.
- Farmland values soared as much as 20 to 40 percent above year-ago levels.
- The Association of Equipment Manufacturers reported a 3.5-percent and 1.9-percent year-over-year increase in four-wheel and two-wheel drive tractor sales, respectively.