Norfolk Daily News: Nebraska’s economy is expected to grow, but low farm incomes dampen prospects


Norfolk Daily News

Nebraska’s economy is expected to grow, but low farm incomes dampen prospects

· Jeffrey Robb, World-Herald Service

The U.S. farm economy is suffering, with no quick rebound expected.

Economists with the Nebraska Business Forecast Council last week warned that Nebraska’s annual farm income for 2018 is expected to drop below $2 billion — the lowest level since 2002. By comparison, Nebraska farmers made nearly $7.5 billion in both 2011 and 2013 — boom times from a different era.

Amid a period of low commodity prices and President Donald Trump’s trade war with China, the situation is not likely to turn around anytime soon. The Federal Reserve Bank of Kansas City warned that farm incomes were likely to have a weak start in 2019 and that lenders were tightening credit.

The ag troubles will have an impact on Nebraska’s economy. The state’s economy will continue to grow — non-farm income is expected to grow up to 4.5 percent through 2021, the forecast says — but the growth is dampened by lagging farm income.

“There’s a limit to how strong Nebraska’s economy can be overall when ag is suffering,” said Eric Thompson, director of the Bureau of Business Research at the University of Nebraska-Lincoln and a member of the forecast council.

Projections have Nebraska farm income increasing to $2.4 billion this year, then $2.5 billion in 2020 and $2.6 billion in 2021.

Thompson said the situation has the potential to stabilize with some improvement in commodity prices and arrival of special payments from the federal government to compensate for the trade dispute.

One positive: A lot of producers paid down their debt when prices were high, which better allows them to weather the lower incomes, Thompson said. Plus, he said, energy prices are down, and farmland values have been falling, which should start to be reflected in property taxes.

Still, Nebraska farmers are showing signs of stress.

Family farm bankruptcy filings are up in Nebraska — from six new cases filed in 2016 to 21 last year, federal court records show. The Nebraska Rural Response Hotline — an outlet for troubled farmers that was spawned by the ‘80s farm crisis — had four months with record numbers of callers, officials say.

On top of the economic troubles, Nebraska’s property taxes are pressing on farmers, several of whom argued for relief in a marathon hearing last week before the Legislature’s Revenue Committee. While farm income drops, statistics from the Nebraska Department of Revenue show that ag property taxes across the state surpassed $1.2 billion again in 2018 — a significant bite out of farmers’ slumping revenue.

Particularly at risk are younger, less established farmers, farms leveraged with higher debt and farmers who can’t diversify or bring in as much outside income, officials said.

“We’re seeing producers young, old, conventional, nonconventional who are all struggling,” said John Hansen, president of the Nebraska Farmers Union.

Some of the hurdles have been around for years. Consecutive seasons of bumper crops kept grain inventories flush. At the same time, U.S. meat production was soaring, and dairies were overflowing. The supply boom meant prices stayed low for a long time, while robust demand kept things from falling off a cliff. In fact, farm income posted a 22 percent rebound in 2017.

Then came the trade war.

As tensions escalated between Beijing and Washington, China slapped tariffs on a host of U.S. agricultural goods. Soybeans grabbed most of the headlines, though a myriad of other products are facing duties, including alfalfa, sorghum and pork.

Ethanol, made from corn, also felt the blow. Todd Becker, chief executive officer of Omaha-based biofuel maker Green Plains Inc., said Monday that the industry, collectively, may have burned through about $1 billion in cash to weather the tough 2018. China has 70 percent tariffs on the U.S. fuel additive.

The Trump administration delivered an aid package to help counter the effects from tariffs. Growers had until Thursday to sign up for the Market Facilitation Program. More than 864,000 producers have applied since the program’s debut in September, and payments have reached almost $8 billion, the USDA said last week.

“The bailouts did help out some,” Lynn Rohrscheib, chairwoman of the Illinois Soybean Association, said in an interview with Bloomberg Television. “But most farmers, they just didn’t want that. We want to be able to grow our crop and receive a fair price.”

Rohrscheib said she knows of some producers who aren’t farming this year because of the tariffs, and that her family “took a $600,000 hit to our annual income” as a result of the trade war.

While a truce in the trade war brought China back to the U.S. soybean market, purchases have been too small to make up for shrinking shipments. Inventories are still bulging across the Midwest, and prices are down 11 percent in the past 12 months.

The U.S. and China made little progress during trade talks last week in Beijing. USDA Deputy Secretary Steve Censky said Wednesday that agriculture issues remain “very much in the discussion and negotiating stage.”

Even if a deal is reached, it could be years before the farm economy completely bounces back.

Thursday, the U.S. Department of Agriculture predicted that soybean exports would stay below their pre-trade war levels until the 2026-27 season.

And a labor shortage, which some in the industry say is at least partly sparked by Trump’s tough stand on immigration, means some employers are having to pay higher wages. On Thursday, U.S. poultry producer Pilgrim’s Pride Corp. said it was increasing wages by $50 million, year over year, to attract workers.

Vern Jantzen, a farmer outside Plymouth in southeast Nebraska, vice president of the Farmers Union and board chairman of the Farm Crisis Response Council, which works with the hotline, said that with all the uncertainty some farmers can’t figure out how to address their financial situation. But the crisis hotline is available, with a message: You don’t have to do this alone. The hotline number is 1-800-464-0258.

“People don’t talk about this a whole lot until they really get up against the wall.”