Despite current recessions in Japan and Germany, prospects for world economic growth are positive. According to the June-July issue of the USDA's Agricultural Outlook, the world economy is in a slow, gradual recovery driven by growth in the U.S. and Asian economies.
World economic growth is expected to be about 2 percent. That's up from last year's anemic 1.4 percent.
Growth in North America and parts of Asia is accelerating, with Central Europe and the Soviet Union holding steady. Economic growth in the rest of Europe, Japan and Latin American has been below past performance and is predicted to stay that way for the rest of the year.
"Given a slow world recovery, the dollar will stay strong, oil prices will moderate, and U.S. interest rates will remain low," say the authors of the report.
So what does this mean U.S. agricultural producers?
1. Expect energy prices to remain stable. The average natural gas wholesale price for 2002 is forecast to be $2.85 per million British Thermal Unit (btu). That's well below the average of $3.96 for 2001.
2. A slow recovery in the manufacturing sector will help keep world industrial fuel demand modest. West Texas crude oil prices are forecast to average $26 per barrel in 2002. That's about the same as last year.
3. Off-farm employment - mostly fueled by the manufacturing sector - is not expected to rebound much in 2002. New off-farm rural jobs are likely to be scarce. However, forecasters say this will not have a big impact on farm incomes as it will be partially offset by stable and lower prices for some farm inputs and minimal increases for others. In addition, inflation is expected to remain low.
4. A strong dollar puts downward pressure on farm prices, and limits growth in farm exports.
What would it take to increase world economic growth?
Forecasters say you would need strong recoveries in both Europe and Latin America to lead the charge. However, according to the report, the consensus among major international forecasters is that a strong recovery will not occur in these areas until 2003.