Silver Linings in Doom 'n Gloom Clouds

U.S. agriculture, strong and credit worthy, holds opportunities.

Whenever, in the past, the U.S. economy has gone through a melt-down, cash-rich conservatives have always seized upon opportunities – silver linings in the clouds of gloom. That's true today as well, especially within agriculture.

Grain and livestock commodity prices haven't crashed with the financial markets, although they could soften if consumerism dramatically contracts. The same is true for land prices, the bedrock of agricultural lending. Land values remain strong across the country – with reduced developer competition in urban sprawl regions. The same is true of credit availability via farm cooperative systems and special state- and federal-financed ag programs. These spell opportunities for farmers and agribusinesses with adequate resources.

More silver linings

"The threat of inflation that dominated discussions earlier this year has faded from consideration by most," says Chris Kuehl, economic analyst for the Fabricators and Manufacturers Association, International. Oil prices have slipped by more than $60 in three months, with natural gas prices following. Steel and copper prices are sagging.

"That," he says, "is good for businesses where these costs are the biggest considerations. Of course, lower input costs don't help much if demand for the finished product is off. But it doesn't hurt to get some cost relief when the recovery begins to surface."

The growing available labor pool means more and better qualified people to select from. That's another silver lining, contends Kuehl. "The rise in unemployment puts some talented people on the market," he explains. "That allows smaller companies [and businesses] to have access to people only larger companies were able to recruit in the past." That can lead to productivity gains.

"It's not that business wants to see economic stress visited on their employees and others," he interjects. "But when times are too good for too long, the culture of work changes, and not always in a good way."

As banks lick their wounds and figure out how to get re-engaged, the winners are going to be the traditional banks and lenders that didn't risk that much in the weird credit markets, Kuehl asserts. He predicts a return to "relationship banking". Businesses, large or small, with good relationships with their banks are going to be in a good position if the banks that manage to stay intact.

"The absurd behavior of the boom has left a lot of damage. But there are islands of sanity that'll now start to hold their own," Kuehl concludes.

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