1. Economic Outlook 2011 U.S. Economy and Agriculture Economic Subject Matter Meetings October 2010 Craig Infanger

2. Annualized percent change Slow Economic Recovery Quarterly Change in U.S. Real GDP Source: Bureau of Economic Analysis June 2009 NBER, 9-20-10 Agricultural Economics

3. I don’t think anyone fully understands yet how much damage was done to the U.S. economy by the events of September 2008. Daniel Henninger WSJ 9-10-09 Agricultural Economics

4. ● The talk about “the new normal”? Bill Gross Jeremy Siegel Agricultural Economics

5. Change from previous month (Thousands) Job Change (Left Scale) Unemployment Rate (Right Scale) Source: Bureau of Labor Statistics Jobless Recovery Change in Payroll Employment and Unemployment Rate Percent Source: Bureau of Labor Statistics Agricultural Economics

6. Source: Bureau of Labor Statistics Agricultural Economics

7. 6.3 million long-term unemployed Agricultural Economics

8. Change from previous month (Thousands) Job Change (Left Scale) Unemployment Rate (Right Scale) Source: Bureau of Labor Statistics Jobless Recovery Change in Payroll Employment and Unemployment Rate Percent Source: Bureau of Labor Statistics 150-200,000 Agricultural Economics

9. “Jobless recovery” is not good news for rural Kentucky What is the official definition of a “farm”? “any operation that sells at least $1000 of agricultural commodities or would have sold that amount of produce under normal circumstances.” KY = ~ 85,000 “farms” Some simple math about “Jobless recovery” and KY agriculture Agricultural Economics

10. “Jobless recovery” is not good news for rural Kentucky $22,050 Poverty level income, family of four $100,000 gross sales x.2 = $20,000 ~6,000 farms in KY $41,538 Median household income in KY $207,500 gross sales x.2 = $41,500 ~3,000 farms in KY Some simple math about “Jobless recovery” and KY agriculture Agricultural Economics

11. Kentucky’s 85,000 farms are dependent on off-farm jobs. >35,000 principal operators worked 200+ days off the farm. “Jobless recovery” is not good news for rural Kentucky

12. Don’t forget where the financial crisis began… Agricultural Economics

13. WSJ 9-29-10 RealtyTrac 9-30-10 Agricultural Economics

14. WSJ 9-29-10 Agricultural Economics

15. Despite low interest rates, it will take more time to work out the housing mess. Herald-Leader 10-15-10 Agricultural Economics

16. Oct. ’07 3.72% Oct. ’08 0.26% Oct. ’09 0.04% Oct. ’10 0.08%

17. This cannot be “normal”… Bloomberg BusinessWeek, August 9, 2010

18. Agricultural Economics

20. Bailout + Credit Programs + Stimulus = $10T! $14,230,000,000,000 Agricultural Economics

21. Actual and Projected Federal Budget Surplus and Deficits, FY97- 10 Source: CBO Billions $ Federal Budget Surplus/Deficit 1997-2011 Agricultural Economics

22. Total Debt Held by the Public and Net Interest Costs Billion $ Source: CBO Agricultural Economics

23. Total Debt Held by the Public and Net Interest Costs Billion $ Source: CBO Agricultural Economics

24. Outlook for 2011 ● Frustratingly low economic growth. ● Jobless recovery for 2-3 years. ● Low interest rates, at least for one more year. ● +/-1.5% inflation, risk of deflation ● Massive federal deficits limit policy options, squeeze programs. Agricultural Economics

25. Macroeconomic Impacts on Ag Policy ● Potential political change in the Congress will change Ag Committee leadership. Agricultural Economics

26. Macroeconomic Impacts on Ag Policy ● Potential political change in the Congress will change Ag Committee leadership. ● Budget deficits will impact current programs and the next Farm Bill. Budget reconciliation in 2011? Traditional coalition between poverty/nutrition groups and farm groups to pass a Farm Bill in 2012? ● Tea Party influence in Congress – serious about taxes and spending? Agricultural Economics

27. Agriculture: Bright Spot in Economic Recovery

28. U.S. Agricultural Trade Exports rebound to record-high levels Billion $ Source: USDA, ERS; fiscal year ending 9/30; p=preliminary 115113 Agricultural Economics

29. “Strong” or “Weak” Dollar? Agricultural Economics

30. “Strong” or “Weak” Dollar?

31. U.S. Net Farm Income Net Farm Income rebounds strongly in 2010 Source: USDA, ERS 10-year average: $72 B +24% Agricultural Economics

32. Source: USDA, NASS Livestock Crops KY Agricultural Cash Receipts Agricultural Economics

33. KY Cash Receipts and Net Income Will Kentucky follow the trend? $1.37B $ billion $3.93B Agricultural Economics

34. Outlook for Ag in 2011 ● Will the world and U.S. economies continue to grow? ● “Jobless recovery” will continue to impact KY farmers and rural communities. ● Another year of favorable weather? ● No wildcards in the deck for Ag in 2011? No major food safety issues, trade wars, etc. Agricultural Economics