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Experts say volatility here to stay in global agriculture industry

MINNEAPOLIS -- Volatility: Expect it, live with it.

That's the message of economists and other analysts, addressing the Minnesota Agri-Growth Council annual meeting Nov. 4 in Minneapolis.

The organization is an advocate for the state's food and agriculture industry, taking in a broad spectrum of the state's ag entities, including 200 members.

The conference at times offered conflicting objectives of the U.S. gearing up to feed hungry people -- "two more Chinas by 2050," said one speaker -- and helping them feed themselves. Kenneth Quinn, president of the World Prize Foundation and a former U.S. ambassador to Cambodia, says the global food trade system is needed and valuable for some countries that will "never be able to feed themselves."

Michael Swanson, chief agricultural economist for Wells Fargo bank, says he's enthusiastic about the outlook for agricultural business, but thinks agriculture will deal with more economic and price volatility than it's had to deal with in 25 years. He says businesses must guard against too much debt and not enough working capital.

He says China is the key international market to watch, and that's a problem because the U.S. "can't see into their systems clearly enough" to make predictions about what they'll do. One of the problems is that China doesn't always make decisions strictly on financial return.

"You can be whip-sawed," Swanson says. "We've seen this in the glyphosate model, in the fertilizer model. Their decision to allocate capital to a sector based on something they want to achieve other than profit."

Tom Gillaspy, Minnesota state demographer, says Minnesota's economy is heading into a lower productivity phase: Fewer babies being born, household populations increasing. Working people in the state and nation have become less mobile.

"People have just quit moving," Gillaspy says, noting that happened even before the recession. Part of this is a result of the average age rising and a concurrent reduction in risk-taking.

Gillaspy says problems of declining birth rates and populations of younger people in the work force are causing economic problems in places like Greece, Portugal, Italy, Ireland, Spain, France, but also in Japan and even China, whose population will be proportionately older than the U.S. starting in 2015 and will see a declining population by 2027.

Stinson says a "new normal" of economic activity likely will be characterized by higher interest rates, slower economic growth, increased numbers of retirees (who may be kept into service for the workforce), less consumption and more saving.

He says residents will need to deal with a more diverse population ethnically, as well as more uncertainty in personal and national futures. He says there will be more "disruptive innovation" and a shift in the balance between private and public sectors, as well as "worries about how to pay for past promises." He expects as political parties become driven more by the extreme elements, there will be an increasing inability to reach agreements.

Stinson says there are "enormous opportunities," however, noting that most of the great companies in the U.S. got their starts during economic downturns.

Dan Glickman, a Democrat who was an agriculture secretary in the Clinton administration and a senior fellow of the Bipartisan Policy Center, says the goal should be to make countries agriculturally self-sufficient, and that may mean help from biotechnology.

Biotech is a "necessary thing for the future of agriculture." For the "millions of starving people around the world, going to the organic Whole Foods supermarket is not a real good choice for them," Glickman says. He stresses that the regulatory systems in these countries need to be developed at the same time.

Chris Policinski, president and chief executive of Land O'Lakes, a $10 billion company, preservation of "sustainable principles" and the "lifestyle of the farmer down the road" is "terrific thing," but that should not be a choice "at the expense of an entrepreneurial, technologically aggressive farmer who has exposed their capital to succeed in the global marketplace -- which, oh by the way, is a pretty important thing."

Mikkel Pates writes for Agweek, which is owned by Forum Communications Co.