Call it the storm before the calm.

“For the first time in more than 40 years, consumer spending is expected to shrink in all major developed countries in 2009 as the world recession has spread to parts of Asia and most of Latin America,” say analysts with the Economic Research Service (ERS) in the recent 2009 “Outlook for U.S. Agricultural Trade.”

“World output is expected to shrink in 2009 between 1.5% and 1.8% from the direct and indirect effects of the crises in world financial and asset markets and institutions amplified by the burst in equity and housing market bubbles in the developed world,” the report says. More specifically:

  • U.S. gross domestic product (GDP) is expected to drop 2.2-2.8% in 2009.
  • Canada’s GDP will shrink 1.5-2%.
  • Latin American output will decline as Argentina and Brazil shrink 0.5% and Mexico drops 2-2.5% in 2009.
  • The Eurozone grew less than 1% in 2008, and is forecast to see GDP shrink 2.5-2.8% in 2009. Developed European economies will continue in recession as the continental economy shrinks 2.6-3.0% in 2009, with every major European economy in recession. Germany and France are expected to see GDP shrink 3% and 2.5%, respectively, with rising unemployment. The United Kingdom is expected to see its GDP drop 2.4-2.8%.
  • Growth in every major Asian economy will be well below 2008 levels, due to sluggish growth in developed economies and the spread of the financial crisis to Asia that have shrunken overall Asian exports.
Obviously, that’s had plenty to do with the puncturing of commodity prices and anemic global trade. As analysts with the Food and Agricultural Policy Institute (FAPRI) explained to Congress earlier this month, “A widespread economic slowdown in 2009 weakens demand for agricultural commodities and, coupled with the high carryover supply from the last two years of high prices, depresses commodity prices in the short run.” However, they went on to say, “Growing demand for food, feed and fuel is expected to return them to historically high levels over the rest of the decade… world population growth, recovery in income growth, and bio-energy mandates drive prices back to their historic highs over the rest of the decade.”

In fact, as gloomy as the outlook is for this year, a growing number of analysts are downright bullish starting in 2010. Part of that has to do with the fact that while economic growth has slowed around the globe, contracting in many instances, growth continues in some of the largest economies, albeit at a slower pace.

For instance, according to the same ERS report:
  • China’s GDP is expected to grow 5-5.5% in 2009, the lowest growth since 1990.
  • The rest of Asia is slated to grow about 1.5%, as Indian growth slows to 3.5% and Korea’s economy shrinks 5%. Japan is slated to shrink 4.5-5%.
In the meantime, the folks at ERS explain, “Farm operators have continued to get bank loans, despite overall credit rationing, as commercial farm loan delinquencies have been at record low levels. Farm operators may see less credit with higher interest rates as off-farm income drops. Still, farm credit will be less subject to the tight credit rationing seen across the rest of the U.S. economy.”