Nathan Kauffman Economist Federal Reserve Bank of Kansas City Omaha Branch June 6, 2013

Transcription

1 Nathan Kauffman Economist June 6, 213 The views expressed are those of the author and do not necessarily reflect the opinions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

2 6 4 2 Percent change from year ago U.S. Real GDP Growth Blue Chip Forecast Change from previous quarter Change from year ago Calculations based on BEA and Blue Chip Forecast April

3 12. Percent Unemployment Rate U.S. Kansas Missouri Source: Bureau of Labor Statistics

4 Booming sectors plateau in 212 The Wildcards A Rebound in Household Spending Commodities Investment Housing Manufacturing Exports Government Consumer Spending

5 Consumer Spending and Housing Percent change from a year ago Personal Consumption Expenditures (left scale) Existing Home Sales (right scale) Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan Source: Bureau of Economic Analysis and National Association of Realtors

6 Federal Government Debt as a Percent of GDP Percent of GDP Actual Baseline Projection Source: Congressional Budget Office

7 Investment: uncertainty is a heavy burden. Business Investment Potential changes in tax law sparked an increase in business investment at the end of 212. Businesses report that increased economic, fiscal policy, and regulatory uncertainty are weighing on investments Percent (SAAR) Equipment and Software Structures Source: Bureau of Economic Analysis

8 Real U.S. Net Exports and Tenth District Manufacturing Index Tenth District Manufacturing Composite Index (left scale) Net Exports (right scale) Source: Bureau of Economic Analysis and Federal Reserve Bank of Kansas City Percent change from previous year

9 Commodity Prices and Performance vs. Equities Index (23 = 1) Index (23 = ) 3 CRB Commodity Index (Left Scale) Sep-3 Mar-4 Sep-4 Mar-5 Sep-5 Mar-6 Sep-6 Mar-7 Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-12 Sep-12 Mar Source: Commodity Research Bureau, Yahoo! Finance, and author s calculations * Commodities include: natural gas, gasoline, WTI crude oil, copper, gold, platinum, corn, wheat, live cattle, cocoa, coffee, and sugar. Equities include the S&P 5 index.

10 Percent Difference between Per Capita Income Growth in Tenth Federal Reserve District and U.S Calculations based on BEA data

11 Are commodities driving a transition in U.S. agriculture?

12 U.S. Corn Inventories and Crude Oil Production 2 Ending stocks-to-use ratio Corn Inventories (Left Scale) Crude Oil Production (Right Scale) Crude Oil Production (Billion Barrels) Source: USDA, EIA Short-Term Energy Outlook, and EIA Annual Energy Outlook 213

13 U.S. Corn Futures Prices 7. Dollars per bushel Corn Futures Prices as of May 29, Corn Futures Prices as of May 29, Crop Insurance Price Jun Sep Dec Mar Jun Sep Dec 5. Sources: barchart.com, data as of May 29, 212 and CBOT, data as of May 29, 213

14 7 6 5 Dollars per acre Corn Soybeans Net Returns (Returns less variable costs) 213 Projections Source: USDA Agricultural Baseline Projections, various years

15 Ratio Feed Price Ratios Beef cattle-corn (Left Scale) Hog-corn (Right Scale) 213 Projections Source: USDA Agricultural Baseline Projections

16 Could the transition in agriculture lead to a bust?

17 Farm Incomes Farmland Values Agricultural Exports Global Competition Energy Policy Farm Debt Interest Rates

18 14 U.S. Real Net Farm Income Billion Dollars (Constant 212 Dollars) USDA Projections Source: USDA

19 Federal Reserve 1 th District Farmland Value Gains Percent change from a year ago 35 3 Nonirrigated Cropland Irrigated Cropland 25 Ranchland Source: FRB KC, Survey of Agricultural Credit Conditions

20 Cropland Value-to-Cash Rent Ratios Percent change from previous year Iowa Cropland Kansas Non-irrigated Cropland Source: NASS, USDA and Iowa State University Investors will spend $32 for every dollar of revenue. Implies a capitalization rate of 3.1% 5

21 Billion Dollars China All Other Countries U.S. Agricultural Exports (9.5%)* Source: USDA Note: 213 agricultural exports forecast based on year-to-date 213 annual growth rate. * China s share of total U.S. agricultural exports in parentheses. (18.4%)*

22 Billion dollars Exports Imports U.S. Agricultural Export Growth USDA Baseline Projections Source: USDA

23 Global Corn, Soybean, and Wheat Expansion 16 Acreage Index (2 = 1) Percent U.S. Share of World Acreage (Right Scale) U.S. (Left Scale) Brazil & Argentina (Left Scale) China (Left Scale) Black Sea Region* (Left Scale) 16 * Black Sea Region includes Russia, Ukraine, and Kazakhstan Source: USDA

24 Billion Gallons U.S. Gasoline Consumption, Ethanol Production, and Mandates U.S. Gasoline Consumption (Left Scale) Ethanol Production (Right Scale)* 215 Mandate (Right Scale) Source: Energy Information Administration. * Ethanol Production is net of trade Billion Gallons The Gap? EIA Forecast

25 U.S. Farm Profits and Capital Investments per Farm 6 5 Thousand Dollars (25 Dollars) Net Returns to Farm Operators (Left Scale) Thousand Dollars (25 Dollars) Farm Capital Expenditures (Right Scale) Source: USDA

26 Farm Debt Outstanding at Commercial Banks Percent change from previous year Non-Real Estate Real Estate Source: FDIC, Call Report data

27 KS Farm Management Farms: Average Debt-to-Asset Ratio % % Debt-to-Asset Ratio >4% % % Debt-to-Asset Ratio >7% % % 25% 2% 15% 1% 5% % >7 Debt-to-Asset Ratio Range (%) Source: Featherstone, A. Who Leveraged the Farm, 212 Agricultural Symposium, Federal Reserve Bank of Kansas City.

28 Monetary Policy

29 Personal Consumption Expenditures Price Index Percent change from previous year Overall PCE Price Index -1 PCE Price Index - Excluding Food and Energy -2-2 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Source: Bureau of Economic Analysis

30 5 Target Federal Funds Rate at Year-End Longer run Source: Federal Reserve Board of Governors, Summary of Economic Projections, March 213

31 Federal Reserve Balance Sheet: Assets Billion Dollars Fed Agency Debt MBS Purchases Liquidity to Key Credit Markets Lending to Financial Institutions Long Term Treasury Purchases Traditional Security Holdings Source: Federal Reserve Board of Governors

32 Modest economic recovery continues, but in transition. Commodities drive a transition in U.S. agriculture. Softer crop sector profits Strengthening livestock profits In the transition, there are risks to U.S. agriculture, possibly beyond 213. Farm incomes, farmland values, export markets, global competition, ethanol, farm debt, and interest rates

33 Federal Reserve Bank of Kansas City 213 Agricultural Symposium For an invitation