Agricultural and Food Policy
 Agri Outlook
Radio
Number 75
Policy: Part 2. Key points to consider as the Senate debates the new farm bill
on agricultural policy, the global economy, and the need for a strong safety net for
the U.S. rice and cotton sector. (3:47 minutes)
Audio/Video Script:
Dr. Bobby Coats
Extension Economist
University of Arkansas, Division of Agriculture
Global growth remains inconsistent yielding rice and cotton price volatility
and uncertainty about future prices. In 2001 the weakness of global growth
produced deflated rice and cotton commodity prices reflective of the 1950s. I’m
Bobby Coats Extension Economist University of Arkansas Division of Agriculture.
The new global economy has amazing potential. The current strong global
growth is creating a huge demand for commodities. The problem is that global
growth continues inconsistent with extreme swings in economic activity from
extremely strong to extremely weak.
The last global recession ended in 2001 and originated with the Asian
financial crisis which began in July 1997 and ended as a global financial crisis
in 2001. Remember the 1996 farm bill was designed to transition U.S. row crop
producers into producing for the global market, but the global financial crisis
caused the 2002 farm bill to be written to regain order of transition for our
producers as they transition to a very protected and volatile global
agricultural market.
The new global economy has created periods of extremely strong commodity
prices and periods of alarmingly weak commodity prices. Inconsistent global
growth reinforces concerns about the viability of the new global economy and
this leads countries to focus on nationalism, protectionism and food security,
which further limits the movement toward increasingly open markets and free
trade and the completion of a new global trade agreement.
The latest potential global financial crisis is the current liquidity/credit
crisis which originates in the U.S. not in Asia, Russia, or even Latin America.
With this crisis U.S. rice and cotton producers are extremely concerned about
the recurring potential at some future date of very low or deflated commodity
prices, which is a direct result of an immature global economy with an unstable
pricing platform; it is also a direct result of agricultural protectionism in
country after country around the world.
In 2001 the weakness of global growth produced deflated rice and cotton
commodity prices reflective of the 1950’s. I expect for the next 10-plus years
the global economy will continue to produce huge swings in global growth, which
will produce huge swings in commodity prices especially rice and cotton.
Presently even with a global liquidity/credit crisis the odds favor strong row
crop pricing opportunities over the next one plus years, but 2010, 2011, or
later have a real potential to produce rice and cotton price levels similar to
the 2001 period.
The economic weakness of 2001 with its devastatingly low rice and cotton
prices are more likely than not to happen once again. The reality is growing a reasonably
stable global economic platform will take at least one or more decades. A strong
farm bill safety net should exist until a reasonably stable global economic
pricing platform exists.
This has been Bobby Coats Extension Economist University of Arkansas Division
of Agriculture.
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