Welcome to Agriculture Economic Tidbits, a new weekly e-newsletter for farmer and rancher members of Nebraska Farm Bureau Federation. The Agriculture Economics Tidbits will provide you with timely tidbits of economic information and policy analysis focused on Nebraska’s largest industry, agriculture, and its key players, Nebraska’s farmers and ranchers. The newsletter will break down global and national economic trends and what they mean for Nebraska agriculture, stay abreast of latest market movements, and provide the latest results from Farm Bureau research on current policy issues like property taxes, school funding, farm programs and international trade—all with the goal of helping you maintain a viable farming or ranching operation.
Agriculture Economic Tidbits will be emailed each Monday. As a Farm Bureau member, you will receive a copy for the next three weeks. If you like what you see, and want to continue receiving Agriculture Economic Tidbits, simply click here:
And if you have any questions or comments on Agriculture Economic Tidbits, please email Jay Rempe.
Nebraska’s total cattle and calf inventory was estimated at 6.8 million head on Jan. 1 according to USDA National Agricultural Statistics Service (USDA-NASS). The number is roughly the same as last year. Beef cows that have calved totaled 1.941 million head, up 2 percent from last year. That means there is one beef cow which has produced a calf for each Nebraskan. Nebraska ranks fourth among the states in the number of beef cows which have calved following Texas, Oklahoma, and Missouri. Nebraska’s calf crop in 2018 was 1.75 million, up 50,000, or 3 percent, from the prior year. Nationwide, all cattle and calves totaled 94.8 million head, up one-half million head from last year. The beef cow herd totaled 31.77 million head, up 1 percent. Over the last four years, the nation’s beef herd grew 2.9 percent in 2016, 3.5 percent in 2017, and 0.8 percent last year, causing an increase in the U.S. calf crop for four consecutive years.
Governments often find creative ways and reasons to intervene in markets. As an example, The Economist magazine reported on a new law implemented by the French government effective Feb. 1. The new law sought to force “retailers to raise prices of food staples lest consumers be unduly profiting from shops trying to lure them with good deals.” The law mandates that food cannot be sold with a profit margin of less than 10 percent. The goal of the law is to support small farmers and small-scale food producers by requiring consumers to pay more for food. It is hoped the additional dollars paid at the retail level will trickle down to higher prices paid to farmers and food producers.
According to the USDA National Agricultural Statistics Service’s (USDA-NASS) most recent 2018 crop production estimates, Nebraska corn production in 2018 was 1.788 billion bushels, up 6 percent from 2017, and Nebraska soybean production was 2 percent greater than 2017, totaling 333 million bushels. The charts below plot Nebraska corn and soybean production since 2000. It’s no surprise that Nebraska production of both crops has trended upward over time. Corn production in 2018 was 76 percent greater than production in 2000 while soybean production last year was 92 percent more. The growth in production over this period is largely the result of improving yields. Acres planted to corn in 2018 were only 13 percent more than that planted in 2000. And, the acres planted to soybeans last year were just 23 percent greater than that planted in 2000.
“Data now shows that organic farmers are +35% more profitable than average traditional farms.” Kevin Van Trump, The Van Trump Report, 3/5/19.
It’s March 4—it’s -5 degrees. The wind chill is -20 degrees. And, there’s a foot of snow on the ground. Frigid temperatures, abundant snow, and gale-force winds have been annoyingly common in Nebraska this winter. This year’s winter weather has been aggravating, and these aggravations can manifest themselves in the economy. Construction and housing, due to the outside nature of the business, are the most affected by the frigid, snowy weather. But, the transportation, manufacturing, hospitality, and retail sectors can also be impacted because of travel interruptions and delays in shipping goods and parts. Automobile body shops see more customers resulting from accidents on slick streets. Yet, car insurance companies probably pay more indemnities than they had expected when setting premiums.
Economists at the University of Nebraska-Lincoln report the total economic output of Nebraska’s ethanol industry was $3.57 billion in 2017. The finding comes from a study examining the impact of Nebraska’s ethanol industry between 2015 and 2017. The study was funded with a grant from the Nebraska Ethanol Board. According to the researchers, ethanol production capacity in Nebraska increased 23 percent since 2014, reaching 2.56 billion gallons in 2017. In 2017, the state’s 24 ethanol plants produced 2.076 billion gallons of ethanol employing 1,453 employees. Figure 1 illustrates the growth in Nebraska ethanol production since 2006.
Common Ground, a publication by Farm Credit Services of America (FCSA), reports farm values in Nebraska declined 1.0 percent over the past six months, 0.9 percent over the past year, and 13.7 percent over the past five years. In comparison, Iowa farmland values over the past six months dropped 1.4 percent; South Dakota values fell 2 percent; and values in Wyoming inched up a bit. FCSA also reports the most common methods of selling cropland in Nebraska was through realtors (37 percent), public auctions (32 percent), and private sales (27 percent). Auction “no sales” declined from 4.3 percent in 2017 to 2.9 percent in 2018.
“My name is Pat Brown. I’m currently the CEO and founder of Impossible Foods, whose mission is to completely replace animals as a food production technology.” The Future of Meat, Freakonomics Radio, by Stephen Dubner and produced by Zach Lapinski, Feb. 13, 2019.
The U.S. trade deficit with the rest of the world has been getting a lot of attention lately. In January, the deficit was estimated to be $56.6 billion, the highest level in nearly a decade. President Trump believes the trade deficit is bad and argues the U.S. is losing to other countries with which it trades. Accordingly, he believes the U.S. must renegotiate trade agreements and enact tariffs on imported goods to rectify the large deficits. The President’s arguments raise two questions: Are trade deficits inherently bad? And, is the U.S. losing to the rest of the world by having such large trade deficits?
Dr. Michael Swanson, chief agricultural economist for Wells Fargo, says Americans crossed a line in 2015 when they spent more money for food and beverages away from home than they did on food and beverages prepared at home. These and other changes in agriculture and food production were highlighted by Swanson in a recent blog. Swanson wrote “Following World War II, the food and beverage industry added $1.50 to every dollar that the farmer and livestock operator earned for the base commodities. . . Fast forward to 2018. Today the food and beverage industry add $4.50 to every dollar at the farm and ranch level, turning the commodities into food.”
Total TEEOSA aid (Taxpayer Equity Education Opportunity and Support Act) to schools will equal just over $1 billion for school year 2018-19. To calculate TEEOSA aid, the state aid formula estimates each school’s needs—the dollars needed to educate students in the school. The starting point for determining school needs is “basic funding” which for each school is equal to the average of general fund spending of similarly-sized schools. Schools’ TEEOSA aid as a percentage of basic funding can be calculated as a measure of the amount of state aid a school receives relative to its estimated needs. A low percentage means TEEOSA aid accounts for little of a school’s basic funding. A high percentage means TEEOSA aid accounts for a greater proportion of a school’s basic funding.
Getting sworn in on January 3; will get sworn at shortly after.” Terry Keebler, newly elected assessor in Johnson County.
The Department of Agricultural Economics at the University of Nebraska was part of a 2016 survey of farmers and livestock producers in Nebraska concerning their financial health. As part of the survey, producers were asked questions on whether the agricultural land in their operations was owned, cash rented, or share leased during the prior five years. Table 1 shows the survey results for the percentage of land owned and rented in eight regional districts and the state in total. Statewide, 50 percent of the cropland was owned, and 50 percent rented. The Northwest District had the highest percentage of land owned, 64 percent, while the Central District had the lowest percentage, 42 percent.
U.S. Bankruptcy Court statistics show Chapter 12 family farmer bankruptcies filed in Nebraska last year numbered 27, up from 20 filings in the prior year. The chart below shows the number of Chapter 12 bankruptcies filed in Nebraska since 2001. The 27 bankruptcies filed last year were the highest since 2010, when 29 were filed. The highest number filed over the period was 55 in 2003 and the average number of filings over the period was 19.
Years ago, a young agricultural lobbyist with the last name of Rempe testified in support of legislation legalizing the production of industrial hemp in Nebraska. His efforts earned him the nickname of “Hempe Rempe.” Hempe Rempe was unsuccessful then, but now, nearly 20 years later, his dreams may come to fruition as the production of industrial hemp is again a topic at the Nebraska Legislature. The Nebraska legislation follows the passage of the federal farm bill which included language removing federal restrictions on hemp production, allowing hemp producers to participate in crop insurance, and allowing states to decide whether to allow hemp production within their borders. Two bills have been introduced in the Nebraska Legislature—one to decriminalize hemp production and one to set up a regulatory scheme overseen by the Nebraska Dept. of Agriculture to oversee hemp production in the state.
“Data published by the NCBA based on Technomic research shows beef and chicken sharing about 30% of the volume sales at foodservice but beef commanding a bigger share of dollars sales since the price of product sold is much higher.” Daily Livestock Report, Steiner Consulting Group, DLR Division, February 1, 2019.
Effective tax rates allow comparisons of property tax burdens across state borders. For property taxes, effective tax rates equal actual taxes paid in a state as a share of total property market value. Using effective tax rates, one can compare tax burdens without getting bogged down in policy differences between states. The methodology was used by researchers for the Legislature’s Revenue Committee in a 2014 interim study report (LR 566) examining methods used by states to set the taxable value of agricultural land. Here, the methodology is resurrected using data from the USDA Economic Research Service and National Agricultural Statistics Service to calculate effective tax rates on agricultural property in Nebraska and bordering states. The results are shown in Figure 1.
Climate change and greenhouse gas (GHG) emissions are increasingly capturing the media and public’s attention. Last week’s release by congressional Democrats of a “Green New Deal”, a 10-year plan to reduce net greenhouse gas emissions in the United States to zero, is the latest evidence of the growing attention paid. A carbon tax is often suggested as a means to reduce GHG emissions by taxing industries and activities which are large emitters. Some people have even suggested a carbon equivalent tax on meat consumption arguing it will reduce the demand for meat and consequently reduce livestock CHG emissions. Clearly such a tax would affect Nebraska’s livestock sectors.
Nebraska is drought-prone. Nebraska farmers and ranchers do not need to be reminded of this fact. Now, a report by the USDA Economic Research Service shows Nebraska corn producers lead the nation is adopting new technology to combat drought. According to the report, Nebraska corn producers led the nation in the use of drought tolerant (DT) hybrids in 2016 (Figure 3), 42 percent of Nebraska’s corn acres that year were planted with DT hybrids. Kansas producers were next, planting 39 percent of their corn acres with DT seeds. The figures come from the 2016 Agricultural Resource Management Survey (ARMS) which is an annual survey of farms’ production practices, financial characteristics, and demographics.
“Annual inflation is reckoned to be 1.7m per cent (the government no longer publishes the numbers), which means that bolivar savings worth $10,000 at the start of the year dwindle to 59 cents by the end.” The battle for Venezuela, The Economist, February 2nd, 2019.
As the Legislature contemplates property tax and income tax relief in 2019, it might help to explore the history of tax relief efforts enacted since 2007. In that year, the Legislature passed LB 367 which established the Property Tax Credit Program, broadened income tax brackets, eliminated the marriage penalty and changed the standard deduction for income taxes. At the time, the package was estimated to provide $185 million in property and income tax relief per year--$110 million in property tax relief and $76 million in income tax relief.
An economic analysis of five complete beef production systems conducted by researchers at the University of Nebraska found calves born in June netted the greatest profit per calf (Table 2). The researchers attributed the greater profit for June-born calves to “greater age at weaning resulting in heavier weights into the feedyard.” The researchers also found that a semi-confined system, one with confinement of pairs in a dry lot during the summer and grazing corn in the winter can be competitive with pasture-based systems, but a year-round confinement system is not competitive with other systems.
U.S. farm sector debt is growing and is projected to hit a record-high of $409.5 billion in 2018, up 4.2 percent from 2017. Real-estate debt in 2018 is projected at $250.9 billion, and non-real estate debt is projected at $158.6 billion, both record highs. Dr. John Newton, Chief Economist for American Farm Bureau, recently examined farm sector debt figures, who holds the debt, and how that has changed in an AFBF Market Intel piece. It can be found at: https://www.fb.org/market-intel/.
“In 2018, for the first time, Brazil exported more than $100 billion worth of farm products. The total, up 6% from 2017, was driven mainly by soybeans, beef, and cellulose pulp, with China as the No. 1 market.” CNA cited in the Van Trump Report, February 1, 2019.
The second year of competition for the University of Nebraska-Lincoln Testing Ag Performance Solutions (TAPS) program is in the books and surprise, the most profitable team in the corn competition was a group of employees with the Nebraska Dept. of Environmental Quality (DEQ). Teams participating made decisions on six parameters in producing and marketing corn: irrigation management; nitrogen management; hybrid selection; seeding rate; grain marketing; and, crop insurance. The decisions were applied to test plots at the North Platte extension center. Twenty-eight teams made up of producers, university personnel, state agency personnel, and private agricultural businesses competed with 20 teams managing corn plots and 8 teams managing sorghum plots. Awards were given for most profitable, most efficient, and highest yield.
Property taxes on agricultural land in 2017 equaled 51 percent of Nebraska farmers and ranchers’ net farm income for the year. That’s one of the findings of an investigation undertaken by Dr. Dave Aiken of the University of Nebraska-Lincoln. Using USDA Economic Research Service data, Aiken calculated the percentage of net farm income that went to pay taxes on agricultural land for Nebraska and the U.S. as a whole for each year from 1950 to 2017. Aiken found, “that the percentage of net farm income that Nebraska farmers and ranchers paid for property taxes over this period was 46% higher than the comparable figures for US farmers and ranchers.” Aiken concludes, “Nebraska farmers and ranchers carry a property tax load almost one and a half times as great as US farmers and ranchers in general.”
Passage of the U.S., Mexico, Canada Agreement (USMCA) negotiated between the three countries last year is a top policy priority for U.S. agriculture in 2019. The agreement continues most of the NAFTA provisions relating to agriculture, but also adds new provisions to provide greater market opportunities for dairy and poultry and address non-tariff disruptions in trade between the three countries. Last year, a Purdue University study commissioned by the Farm Foundation examined the benefits to U.S. agriculture under different scenarios related to USMCA and the retaliatory tariffs currently in effect. A summary of the study noted:
“Median [U.S.] household income reached $61,372 in 2017, which is higher than comparable countries like Canada, Germany, France, Britain and Denmark, and exceeded only by a handful of tiny rich nations sitting on oil (Norway) or numbered bank accounts (Switzerland and Lichtenstein). U.S. median household size, meanwhile, has declined, so individual wealth has increased even more than the income numbers reﬂect.” Mona Charen, Creators Syndicate, printed in the Omaha World Herald, 1/28/19.
The beef sector has been largely unphased by the ongoing U.S. trade disputes with other countries. Fortunately, trade quarrels with the largest U.S. beef customers, South Korea and Japan, have been avoided. According to the U.S. Meat Export Federation (USMEF), through October of last year, the value of overall U.S. beef exports was up 19 percent compared to the previous year. Exports to Japan were up 15 percent and those to South Korea were up 50 percent. Japan was the largest U.S. customer, purchasing nearly $1.5 billion in U.S. beef. For Nebraska, the nation’s largest beef exporter, these exports have helped offset the less than stellar export performance of other agricultural commodities.