The outlook for the global farming industry in 2016 can’t be seen in isolation. The interdependencies between it and the other segments of economic activity are complicated and subject to widespread disagreement in interpretation, but they exist. So, what does that mean in terms of 2016?
The global economy
Writing in the first few weeks of the year, it appears to be clear that, yet again, the year ahead is going to be a difficult one for the global economy. Although this may sound something like a rerun of the news from any year since 2008, sadly, it does seem likely to be the case. Currently, the United States and United Kingdom economies are growing moderately healthily, but their economic recoveries remain fragile. Consumer spending in both countries is extremely thin and unpredictable.
The once unstoppable Chinese economy is slowing down, though growth remains at levels that almost any other country would regard as an unachievable ideal! It seems likely as if the demand for certain types of agricultural products in China will continue to increase, which is good for their domestic producers and those countries they import things such as tractors and agricultural machinery from and produce.
Unfortunately, from that point onwards, the picture looks increasingly gloomy. Australia and the Euro Zone appear to be facing relatively anemic growth prospects for the year ahead. In addition, Greece continues to be a huge, even though currently not ‘headline news’ worry for European financiers. Many economies in South America and Africa appear to be heading for dire difficulties, and even the one-time energy-rich Russian economy looks to be in some danger of spiraling ever further downwards, almost out of control.
The early weeks of 2016 have also seen several moderate waves of panic on the various stock markets, and although these haven’t yet tipped over a precipice into a mass panic sell-off, things have come close to that on a few occasions. Once again, there is some evidence that capital is starting to move back into things such as gold and other safe-havens.
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In terms of the political effects on the global economy, the situation in the Middle East is far from encouraging though it probably has to be said that the world has largely grown used to that over the past 70 years. Unless oil supplies are threatened by the situation there, the appalling tragedies may not directly impact the global economy.
More immediate concern to the markets and economists is the simmering and increasing tension between Russia and NATO along its huge border in Europe. Economic instability in Russia and a lack of predictability relating to its political decision-making are on the minds of many investors. The situation in terms of the mass migration into Western Europe is also proving to be an economic worry.
The exact numbers are unknown. The European Union itself estimates that approximately 1.8 million people migrated into Europe in 2015. Even conservative estimates of the numbers that have entered Europe since 2012 and who will enter to the end of 2017 yield some quite staggering figures. Given the uneven distribution of the migrants into relatively few of the more industrialized and wealthier EU countries, the immediate short-term impact of the costs involved and potential for social disruption, with the economic effects they might entail, is worrying some.
It seems sensible to anticipate that at least some of this will feed into the agricultural sector and have a detrimental effect on producers trying to raise investment capital. However, that negative impact may be more than compensated by the ongoing global demand for affordable food due to rising populations. Agriculture may be one of the relatively few sectors that does reasonably well in 2016, even if times elsewhere are tough.