September 19, 2000

Presidential candidates Al Gore and George W. Bush seem to agree on at least one thing: they aren't going to mess with Federal Reserve Board Chairman Alan Greenspan if elected, according to the American Farm Bureau Federation. A new book suggests he probably will be around a while longer, regardless of who wins the White House.

Stewart Truelsen, director of broadcast services for the AFBF, says Greenspan's name frequently comes up when Republicans and Democrats argue over who should take credit for the current economic prosperity. Republican vice presidential candidate Dick Cheney believes credit should extend back to President Reagan who first appointed Greenspan. The Democrats credit President Clinton and remind that he re-appointed Greenspan this summer to his fourth term.

In their book "Words that Move the World's Markets, the Greenspan Effect," authors David B. Sicilia and Jeffrey L. Cruikshank discuss the powerful effect that Greenspan has on the economy and world financial markets. They have collected many of his comments and statements, including those about agriculture.

Unfortunately, Truelson says, there is nothing Greenspan has said about agriculture that would raise commodity prices. Even if the "Greenspan effect" were applied to farm commodity markets, it might not be good. The authors claim his words, more often than not, have a negative effect and make the stock market go down.

What Greenspan has said about farming is that farmers have been unable to share in the nation's increasing optimism and wealth. "The very strong growth of our domestic economy has contributed in only a limited way to the expansion of demand for farm products. Consumers, especially in affluent countries, do not boost spending on food nearly to the same degree that their incomes rise," said Greenspan.

Because of the limited potential for expansion of domestic demand, Greenspan concludes that the farm sector is "critically dependent on demand from abroad." He blames weakness in the Asian economies for the most recent drop in farm exports. "But clearly, our farm sector stands to gain, perhaps appreciably, when more favorable economic conditions finally emerge," he said.

Turleson says Greenspan also is watching technology changes in agriculture and looks favorably upon precision farming and biotechnology. He thinks they will lead to greater efficiencies and lower production costs, but may contribute to structural changes in agriculture. "The new technologies seem destined to integrate farming operations more tightly into our complex modern economy. This integration does not necessarily impinge upon family farming as a way of life, but it does alter the image of the independent farmer that remains so deeply rooted in the American psyche," he said.

As with all things, Greenspan is cautious about the farm future and has indicated the financial side needs to be monitored more closely. "The near term may be challenging for farmers and their lenders, especially if farm prices remain depressed, and the technical changes that will be helping innovative producers may even add to the stresses being felt by higher-cost producers," said Greenspan.

Farmers have been mildly critical of the Fed chairman because of his eagerness to raise interest rates to slow the economy. But the authors of this book say Greenspan is a sympathetic and informed partner of farmers. And it appears he will be around awhile.