Europe’s widening financial mess is a source of growing concern in American agriculture, raising the specter of a global recession that would curb demand for many farm products, such as Tim Haas’ Kobe beef.
As Europe’s debt crisis roiled the world’s financial markets in recent months, Haas, who helps run Kearney, Mo.-based Premium Proteins LLC, said he seen customer demand erode. That weakness likely sets the tone for 2012, Haas said, and calls into question his plans to start selling the company’s products in Europe next year.
“I am more worried how it would affect the world market as an indirect cause of a world recession,” Haas said in an e-mail, referring to further deterioration in Europe. “The last two months are indicative of a very soft year for next year, both in exports and domestic.”
For Haas and other producers, the prospect of a break-up of the euro or a Europe-led downturn raises potential for a repeat - or worse – of the damaging aftermath from the 2008 financial crisis. In 2009, U.S. agricultural exports sank 16 percent from the previous year, to $96.3 billion, according to the Agriculture Department, with dairy products among the hardest hit. Net U.S. farm income tumbled 27 percent, to $61.6 billion
A recession in Europe would threaten the fragile U.S. economic recovery and likely prompt budget-tightening among consumers still grappling with high unemployment, meaning they may forgo more-expensive foods, such as steaks and chops, and seek cheaper store-brand milk, analysts say.
With Europe, “the impacts are indirect, but potentially large,” said David Anderson, an agricultural economist at Texas A&M University.
“The volatility caused by the events in Europe moves our stock market constantly, right or wrong,” Anderson said. “Those extreme moves in the stock market cause a lot of concern among consumers. That fear, uncertainty, instability… does have impact on how people spend. Those effects then move through our economy.”
Europe produces much of its food and does not rank among Japan, Mexico and other top foreign buyers of U.S. beef, pork and dairy products. This year, U.S. farmers benefitted from an export boom driven partly by China, whose economic growth continued to outpace the rest of the world.
Still, even with U.S. farmers about to close out their most profitable year on record, cracks in agriculture’s outlook have shown up with increasing frequency.