(Dec. 27) An increase in home loan delinquencies and foreclosures may lead the U.S. economy into a recession in 2008, but the downturn may not immediately impact what continues to be a vigorous agricultural economy, one Farm Bureau Federation economist said in mid-December.

“Numerous (home loan) borrowers will see their loans reset over the next 9 to 18 months, moving even more home mortgages into delinquency and potentially even foreclosure,” said Bob Young, chief economist of the Washington, D.C.-based American Farm Bureau Federation.

Young’s comments were part of the group’s monthly update provided to members in December.

In the report, Young said third-quarter 2007 growth of 4.9% will certainly slow in coming months, and most economists say there is a 50-50 chance the U.S. will enter a recession in 2008.

In an interview Dec. 18, Young said consumer spending on fruit and vegetables could be altered by changes in consumption patterns during a recession. For example, consumers may eat at home more during a recession, reducing expenses at restaurants but increasing the dollars spent at retail produce departments.

Despite admitted economic challenges, the Washington, D.C.-based National Restaurant Association has predicted that restaurant industry sales are expected to reach $558 billion in 2008, up 4.4% over 2007.

In general, retail food prices have been rising nearly 5% to 6% on annualized basis in 2007, but Young said fourth-quarter 2007 prices are expected to come in lower than third-quarter average food prices.

Young said a dramatic drop in oil prices could spare the U.S. an economic downturn, but there is no evidence that will occur.

However, one element that is helping the entire economy is the weak U.S. dollar, which has spurred both agricultural and non-agricultural exports.

Young said the U.S. economy would only be growing at a 1% clip in 2007 without strong export performance.

U.S. agricultural exports for January through October 2007 were $71.4 billion, up 23% from the same period in 2006 and already higher than the $70 billion exported in all of 2006.

U.S. fresh apple and pear exports from January through October totaled $573 million, up 16% from the same period last year. U.S. stone fruit exports were $447 million, up 14.5% from the corresponding period a year ago.

Also, Young said agriculture is somewhat buffered from the general economy, he said.

However, weaker demand for meats can eventually back up feed demand and put pressure on grain prices.

Given the strong global economy and the growing biofuel market for corn, even that factor is less significant, he said.

Another support for agricultural commodities — particularly wheat, corn and soybeans — is the fact that large fund traders tend to move money into commodity futures markets when inflationary pressure bring down the stock market.

Fund traders hedge their potential stock market reversals by speculating that commodity prices are headed higher. Traders take positions on the buying side of the futures market, thus supporting bullish commodity trends.

If fund traders were to pull off those positions, that would have a depressing effect on commodity prices, Young said.