Welcome to Agriculture Economic Tidbits, a weekly e-newsletter (emailed Mondays) for farmer and rancher members of Nebraska Farm Bureau. 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.
The USDA Economic Research Service estimates 2019 Nebraska net farm income rose $1.6 billion to $4.2 billion, a 61 percent increase compared to 2018 and the highest income level since 2015 when it equaled $4.8 billion (Figure 1). Last year’s increase was fueled by an increase in government assistance, $435 million, and a decline in expenses of slightly more than $1 billion. Direct government payments in 2019 accounted for 27 percent of net farm income for the second consecutive year (Figure 2).
The Department of Revenue announced the 2020 property tax credit on agricultural property amounts to $109 million statewide, or $2.38 per taxable acre. Last year’s credit on agricultural property was $116 million, or $2.52 per acre. The credit on non-agricultural property this year equals $166 million, $7 million higher compared to last year. The total credit amount, $275 million, remains the same as last year.
The rules governing world trade are the product of many years and multiple rounds of negotiations. Beginning in 1944 with negotiations to create the “Bretton Woods” institutions, the International Monetary Fund (IMF) and World Bank, to the discussions resulting in the General Agreement on Trade and Tariffs (GATT) in 1948, and finally, to the creation of the World Trade Organization (WTO) in 1995, the world has been marching towards greater trade liberalization.
Tidbits is providing charts with updated crop progress reports each week. Due to the Columbus Day holiday there will not be reports in Tidbits today.
“The other story concerned August imports by that nation [China]. During the month, they unloaded 1.01 MMT of corn, up 340% over last year, 440,000 MT of barley, up 24%, 640,000 MT of sorghum, up 131%, and 350,000 MT of pork, up 104%. For the year to date, corn imports are up 50%, barley is down 12%, sorghum up 490%, and pork up 134%.” The Huebner Report, Dan Huebner, Sept. 23, 2020.
Nebraska’s agricultural production complex powers 22 percent of the state’s gross domestic product (GDP) (a measure equivalent to GDP at the national level), evidence that agriculture packs a powerful economic punch. The finding comes from a University of Nebraska-Lincoln (UNL) Dept. of Agricultural Economics and Bureau of Business Research study of the economic impact of the Nebraska agricultural production complex.
Another interesting finding of the UNL study was that agriculture-related manufacturing in Nebraska contributes more to the state’s gross domestic product than the crop and livestock sectors combined, $11.2 billion vs. $10.0 billion, respectively. This means that while the economic impact of the production sector will vary due to volatility in farm income, the impacts of agriculture-related manufacturing are more stable and contribute to the state’s economic stability. Agriculture-related manufacturing helps Nebraska weather financial downturns in production agriculture.
Last week, Tidbits contained a story on changes effective July 1 to the Livestock Risk Protection (LRP) program. An astute reader (who also happens to work with LRP daily) pointed out additional changes were made to the program by the Federal Crop Insurance Corporation Board in August, effective for 2021. These changes were not included in last week’s story.
“Life under the liberal model of capitalism can be risky and scary; its failures no doubt cause suffering. But the rewards when things go well can be immense.” Free exchange: which market model is best? The Economist, September 12th, 2020.
The USDA Risk Management Agency (RMA) in June announced changes to the Livestock Risk Management Protection (LRP) insurance program. The changes became effective July 1. LRP, available for feeder cattle, fed cattle, swine, and lambs, is designed to insure against price declines. Producers can purchase a variety of coverage levels and insurance periods to match their operations and marketing timetables. When actual prices fall below the coverage price an indemnity for the difference is paid.
No sector of Nebraska agriculture was hit harder by COVID-19 than the ethanol sector. People working from home and stay-at-home orders meant less travel, less gasoline sales, and less ethanol sales. Scott Irwin, an agricultural economist at the University of Illinois, reports gasoline use this year dropped 48 percent compared to last year between March 13 and April 3. Ethanol use also dropped 48 percent, the only difference being the bottom in ethanol use came two weeks after the bottom in gasoline use.
The Platte Institute and the Nebraska Farm Bureau released a joint policy brief examining the economic disruptions from COVID-19 on Nebraska’s agriculture sector. The brief details the challenges the industry faced prior to and during the one-two punch brought on by the pandemic, as well as the ongoing uncertainties agriculture faces in its wake.
Figure 2. Acres in Nebraska Burned by Wildfires
Source: Nebraska drought fuels wildfires; state vulnerable to ‘megafire’, Nancy Gaardner, Omaha World Herald, September 21, 2020.
“Yield gain of grains and cereals has exceeded global population since the early 1990s, and oil crops’ yield gain started outpacing population growth starting in the late 1990s. It’s no wonder that there has not been a scarcity price premium in these crop categories. Now, even without increasing acreage, production will exceed population growth by 50% driven just by yield gain in cereals and grains. The poor prices for crop producers reflect this supply and demand dynamic.” Which style of eating will the developing world follow? Food for Thought, Michael Swanson, Wells Fargo Chief Agricultural Economist.
The Trump administration on Friday announced another round of federal assistance payments for farmers and ranchers who continue to face market disruptions and costs due to COVID-19, Coronavirus Food Assistance Program 2 (CFAP 2). The payments, up to $14 billion, are in addition to the first round of CFAP payments and will go to producers of crops, livestock, dairy, and other commodities. Signup for the CFAP 2 begins Sept. 21 and runs through Dec. 11. Additional information and application forms can be found at www.farmers.gov/cfap.
Like clockwork, U.S. agriculture every year runs a trade surplus with the rest-of-the-world, meaning the U.S. sells more agricultural goods to the rest-of-the-world than it imports. However, this year the clock is taking a licking and is struggling to keep ticking. Through the first seven months of the year, the U.S. is running an agricultural trade deficit of $3.5 billion. U.S. exports of agricultural goods are off 3 percent, or $2.7 billion; imports are up 1 percent, or $0.9 billion.
The cattle and beef industry contribute tens of billions of dollars to Nebraska’s economy each year. The industry also comprises one of the most complex and amazing set of markets in the world. A calf is born in the Nebraska sandhills, and 2-3 years later a steak ends up on a plate in South Korea.
“Nebraska now counts more people who are 75 or older than those who are under 5 years old for the first time in history.” Don Walton, Lincoln Journal Star, Aug. 24, 2020.
For the second consecutive year Cuming County almost scored a “hat trick” for the highest average cash rental rates on irrigated, dryland, and pasture ground. Cuming County led the state in average cash rents on irrigated and dryland ground last year and did so again this year with rents of $291/acre and $243/acre, respectively. Both rates were off slightly compared to last year. However, Cuming County’s shot at the hat trick veered wide of the goal when its average rents on pasture failed to rank among the top three counties. Like last year, Wayne County had the state’s highest average cash rent on pasture at $86/acre, $5 higher than last year. The data comes from the USDA National Agricultural Statistics Service.
The USDA rental data covers multiple years so changes in cash rents over time can be tracked. Trends can provide insights into the underlying agricultural economy. The maps below show the changes in rents for pasture, dryland, and irrigated land between 2017 and 2020. Please note comparisons could not be made for every county due to the unavailability of data for both years.
“According to our reckoning, an American wearing a mask for a day is helping prevent a fall in GDP of $56.14. Not bad for something that you can buy for about 50 cents apiece.” The Economist, Cloth of gold, August 22, 2020.
The challenges facing agricultural producers grow every year. Price volatility, new technologies, external market shocks, global economic disruptions, trade disputes, production challenges, policy changes, and more can affect farm and ranch bottom lines. Farmers and ranchers must manage the risks posed by these challenges to remain economically viable. Helping producers manage, adapt, and overcome these risks is the mission of the Extension Risk Management Education (ERME) program.
“I hear a lot of buzzing, ya know it sound like my little honey bee,” sang Muddy Waters in the blues song “Honey Bee” written by Waters and Bumble Bee Slim. Muddy would be hearing less buzzing in Nebraska this year according to the USDA National Agricultural Statistics Service (NASS).
U.S. farm output tripled between 1948 and 2017, growing at an average annual rate of 1.53 percent according to the USDA Economic Research Service (ERS). Output growth comes from two sources: employing more inputs (i.e. plant more acres); or productivity growth, achieving greater output from the inputs employed (greater yield per acre). ERS researchers attribute the farm output growth to the latter. Agriculture’s producing more output from the inputs employed.
“The demand for hair generally exceeds supply, fueling an almost constant sense of scarcity,” Emma Tarlo quoted in The Economist on Nigeria’s insatiable demand for hair. Nigeria imported more than 3,600 tonnes of hair in 2018 including human, animal, and synthetic. Hair from everywhere, The Economist, August 15th, 2020.