Double-dip Could Squeeze Farmers
August 10, 2011 by UPI - United Press International, Inc.
WEST LAFAYETTE, Ind., Aug. 10 (UPI) — Purdue University agriculture economist Mike Boehje said a second U.S. recession could disrupt demand enough to squeeze profits out of livestock farming.
“A situation like that certainly has the potential to take the profitability out of livestock production,” he said, pointing out that farmers are vulnerable to a drop in demand from China and from U.S. consumers.
“The Chinese economy is growing, and that has increased demand for U.S. grains, especially soybeans. We’ve also had short supply problems with grains,” Boehje said in a statement.
Agriculture came through the previous recession relatively unscathed, owing to rising demand from Asia, consumer needs and ethanol production mandates.
But a downturn in equity markets also tends to support commodities, as investors turn to “real assets” when stocks are in decline, Boehje said.
“When there is long-term instability there tends to be a flight to real assets. People move away from financial assets. Agriculture is a real asset industry, so that does offer some protection,” he said.