2016 Farm Program Payments . . .

Economic Tidbits 12.18.17

Nebraska crop producers received $646 million in Price Loss Coverage (PLC) and Agriculture Risk Coverage—County (ARC-CO) payments last fall for the 2016 crop year.  In total, the USDA distributed $6.9 billion in payments to participating producers under these two programs.

The maps below show the final payment rates in each county for combined yield, irrigated, and non-irrigated rates under the ARC-CO program for corn, soybeans, and wheat.  In Nebraska, 97 percent of farms producing soybeans participate in ARC-CO, 95 percent of farms producing corn participate, and 65 percent of farms producing wheat participate.  The average ARC-CO payment per base acre for the 2016 crop year was $53.89 per acre for corn, $5.65 per acre for soybeans, and $11.46 per acre for wheat.  As shown on the map, many farmers were in counties which did not receive payments under ARC-CO for soybeans.  In addition, farmers in many counties with separate irrigated and non-irrigated corn yields did not receive payments for non-irrigated corn.

 

Dr. Brad Lubben, agricultural economist at the University of Nebraska-Lincoln, expects payments under ARC-CO for the 2017 and 2018 crops to be much less because average prices for program commodities have fallen.  He projects no payments for soybeans or sorghum for this year, but the lower prices will trigger substantial payments for those wheat and grain sorghum producers who enrolled in the PLC program.  Lubben projects total crop program payments for this year (2017 crop) will equal $200 million and will be less than $100 million for the 2018 crop year.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and a firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide an in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

What’s Ahead for 2018 . . .

Economic Tidbits 12.18.17

The USDA expects prices for corn, cattle, and soybeans to be off a bit in 2018.  Prices for wheat and hogs are expected to be higher.  Given the large production levels of all these commodities in recent years, prices, while soft, have been stable due to relatively strong demand, boosted in part by robust export markets.  The strong demand needs to continue, and, thus far, signs point to demand remaining strong.  For example, Jim Robb, director of the Livestock Market Information Center, recently said the average American is expected to eat 219 pounds of red meat and poultry this year, the highest level since 2007.

bigstock-field-5378624.jpgIn years past, crop producers could count on farm program payments to help offset the sting of lower prices.  This won’t happen in 2018 as payments will be substantially lower.  Dr. Brad Lubben, an extension economist at the University of Nebraska-Lincoln, estimates program payments received by Nebraska producers could be $400 million less next year.

Recent forecasts suggest Nebraska net farm income for 2018 will grow 5.9 percent.  Dr. Lubben expects net farm income to settle between $4.0 and $4.5 billion through 2020.  All this suggests the continued need for cost cutting, working with financial institutions, strategic marketing, and financial planning to help continue to navigate through the soft prices.  Several factors will influence the profitability of agriculture in the coming year:

U.S. Economy:  The U.S. economy has momentum.  The unemployment rate, 4.1 percent, is at the lowest rate since 2007, hourly earnings were up 2.5 percent in December compared to the prior year, personal income levels are growing, and the country’s GDP is expected to grow 2 percent in 2018.  A growing economy means growing demand for food, especially meats.  The positive outlook for the U.S. economy should be a plus for agriculture.

World Economy:  World economic growth is expected to be around 2.7 percent in 2018, helping boost export demand for U.S. agricultural products.  Pay special attention to the economies of Canada, Mexico, China, Japan and South Korea, typically Nebraska’s largest customers for agricultural goods.  The economies in each of these countries are expected to grow, with China expected to grow at around 6 percent.  These growing economies should provide opportunities to sell Nebraska agricultural products.

Trade Policy:  The biggest potential threat to agriculture remains the trade policy of the Trump Administration.  The U.S. is negotiating with Canada and Mexico to modify the North American Free Trade Agreement (NAFTA).  President Trump has threatened to withdraw from the agreement if he is not satisfied with the outcome of the negotiations.  President Trump has also said he wants to renegotiate the U.S. trade agreement with Korea (KORUS).  These trade agreements have been important contributors to growth in Nebraska’s exports.  Watch the actions of the Trump Administration on trade policy.

Value of the Dollar:  Changes in farm income tend to run counter to changes in the value of the dollar.  The value of the dollar today is roughly 10 percent less than it was in early 2017.  No doubt the drop contributed to the competitiveness of U.S. agricultural products and helped boost exports.  A growing economy and higher interest rates will tend to push the dollar higher.  Watch the dollar in 2018 to see if the decline in value continues.

Federal Taxes:  Congress passed, and President Trump signed, major tax reform legislation last month.  Early signs point to the reform legislation resulting more dollars in producers’ pockets through tax savings.  The extra dollars will help offset the cash flow squeeze.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and a firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide an in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

SALT & Taxes . . .

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The Chairman of the House Ways and Means Committee, the tax writing committee of the House of Representatives, announced a draft of the federal tax reform bill will be released November 1.   Leaders in both the House and Senate have expressed hope a tax package could be passed by Thanksgiving.  One taxing concern on the minds of many farmers and ranchers is the fate of the deduction for state and local taxes (SALT).  The concern is especially acute in Nebraska given the large amount of property taxes paid by agriculture, roughly $1.3 billion in 2016.

Captiol at night

Under the unified framework for tax reform, the Trump Administration and Republican Congressional leaders said they want to simplify the federal tax code by repealing all itemized deductions, except deductions for home mortgage interest and charitable contributions.  Itemized deductions are claimed by individuals on Schedule A filed with Form 1040.  Most farmers and ranchers file taxes as individuals-the 2012 USDA Census of Agriculture showed 85 percent of Nebraska farms filed taxes as either an individual or family.  Additionally, only 28 percent of farmers and ranchers itemize deductions.  It is these operations who itemize deductions the loss of the ability to deduct state and local taxes could affect.  The average annual deduction for state and local taxes reported by farm sole proprietors on Schedule A for 2009-2015 (excluding 2013) was $128.4 million.  Presumably, the deduction is for state income taxes, property taxes on farm residences, and taxes on personal vehicles.  For these operations, the loss of the deduction could increase federal income taxes an estimated $18 million per year if not offset by other changes.

Corn harvest in Illinois - SeptemberFarmers and ranchers also deduct state and local taxes paid as a business expense for their operations, be it as sole proprietors, partnerships, or corporations.  It is here where most of the property taxes paid by agriculture on land and machinery are likely reported and losing the ability to expense state and local taxes would result in a significant increase in federal taxes.  Fortunately, according to the lobbyist for American Farm Bureau, the ability to expense state and local taxes as a business expense will continue.  Congressional leaders have indicated the repeal of the state and local taxes deduction would only apply on individual returns, and not affect the expensing of taxes by businesses.  But stay tuned, the reform discussions are now beginning in earnest, and no one can predict what might happen.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Disregard for Taxpayers Apparent in SCC Board Action

Steve Nelson1By Steve Nelson, farmer from Axtell, Nebraska and Nebraska Farm Bureau president

 

Can you hear me now? You’ll recall that catchphrase from the popular Verizon ad campaign promoting the company’s prowess in ensuring cell phone customers could connect from virtually anywhere. If only the Southeast Community College’s (SCC) Board of Governors had such a reliable network.

Last November, taxpayers from across the 15-county SCC area sent a message to SCC. It was loud and clear. It came in the form of voters overwhelmingly defeating a $369 million SCC bond measure with nearly 70 percent of the vote. The voters message; show restraint, don’t push massive property tax increases that we can’t afford. Despite the clarity of the message, it apparently never got through, or worse, was ignored by the SCC Board of Governors.

Despite the call for being cautious in taking more taxpayers dollars, in late September the SCC Board acted to increase their tax levy. Instead of a slight increase, the Board opted to take the maximum allowable levy authorized by the state for building construction. The Board’s action will effectively raise property taxes on SCC taxpayers and, in the process, appears to show complete disregard for the message sent by voters.

Partners in the Vote NO 369 coalition, which formed in opposition to SCC’s bond, had warned voters leading up to election day that passing the bond measure was too risky, given that should the bond pass SCC would still have the ability to raise their property taxes even more, by using the building construction levy authority.

Less than 12 months from the vote of the people, that’s exactly what the SCC’s Board of Governors did, pushing forward with their plans, and in the process showing how determined SCC was to take more taxpayer money and how easy it is to ignore the wishes of those who have to fund SCC expansion.

As a partner in the Vote NO 369 coalition, we’ve received numerous calls from angry taxpayers outraged by the SCC’s Board action. They believed, like so many others, that SCC should have gotten the message last fall. Their concerns are well founded. If a 2-1 vote against boosting taxes won’t get their attention, what will?

The smart move, and what we are encouraging the SCC Board to do, is to reconsider their action. While the heart of the matter is about the money, in the vein that SCC is intentionally and actively taking more from those who’ve signaled they aren’t ready to give it, the reality is SCC is breaking public trust, a trust that when taxpayers speak, the public entities accountable to them will listen.

We understand the SCC Board has a responsibility to juggle the needs of students and taxpayers. But we also know that strong public and private relationships are important for building educational opportunities; that includes having a relationship with taxpayers. There’s no denying SCC and the other community colleges have an important role to play in helping grow Nebraska. To keep those relationships strong, SCC’s Board would be best suited over the long-run in taking a step back at this time and recognize the needs of taxpayers. After failing to respond to their initial message, taxpayers across the area are wanting SCC to demonstrate they heard the message so they can stop asking, “Can you hear me now?”

Northeast Nebraska Counties Lead the State . . .

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As was the case in 2016, counties in northeast Nebraska had the highest average cash rental rates for agricultural ground in 2017.  Dixon County had the top average rental rate for irrigated ground in 2017 at $312/acre, surpassing Cedar County by $1/acre.  Last year Cedar County topped all Nebraska counties with a cash rent of $324/acre on irrigated land.   Knox, Wayne, Cuming and Platte Counties all had irrigated cash rents above $280 per acre in 2017.  Counties in Northeast Nebraska also led the state in cash rents on non-irrigated land in 2017.  Dakota County led the way at $266/acre, $5/acre less than last year, followed by Cuming, Thurston, Cedar and Wayne Counties.  Pierce and Cuming Counties had the highest 2017 rents for pasture ground at $73/acre.

The maps in the slideshow below, provided in a recent CropWatch released by the UNL Institute of Agriculture and Natural Resources, provides average cash rental rates for irrigated cropland, non-irrigated cropland, and pasture ground across the state. The data comes from surveys of Nebraska farmers and ranchers by the USDA-NASS.

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Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Federal tax reform-a first impression . . .

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The Trump Administration, the House Ways and Means Committee, and the Senate Finance Committee announced last week they have agreed to a unified framework for federal tax reform.  The framework outlines several tax proposals for both business and individual filers.  Many details remain to be filled in, and legislation needs to be written, but the unified framework does provide some guidance for farmers and ranchers on issues they should monitor as the tax discussion evolves.

Most farm and ranch operations in Nebraska file federal taxes as individuals (Form 1040).  The 2012 USDA Census of Agriculture reported that 85 percent of Nebraska farms claimed the legal status of a family or individual for tax purposes.  The average annual federal income tax after credits reported on returns filed by Nebraska farm sole proprietors was $443 million for 2009-2015 according to the Internal Revenue Service (IRS) data (2013 was not included as data was not readily available).  The average annual effective rate of taxation on farm returns over this period was 14 percent, which was two percentage points higher than the effective rate for all Nebraska individual returns over the same period.

For individual filers, the unified framework proposes to double the standard deduction, consolidate tax brackets from seven to three, lower the top rate from 39.6 percent to 35 percent, eliminate itemized deductions except for mortgage interest and charitable deductions, repeal personal exemptions for dependents but increase the child tax credit, and repeal the alternative minimum tax.  So, what are the tax implications for farmers and ranchers?

Like most Nebraskans, most producers claim the standard deduction on their individual returns.  In 2015, according to IRS, 72 percent of Nebraska farm returns claimed the standard deduction.  Thus, doubling the standard deduction has the potential to reduce taxes for these filers subject to other changes in tax brackets and rates, which are not known now.  For producers who itemize, total Schedule A deductions amounted to $196 million in 2015, excluding home mortgage and charitable contributions.  Losing these deductions, and what it means in ultimate taxes paid, will depend on individual filer’s amount of itemized deductions relative to the increase in the standard deduction, and ultimately, the changes in tax brackets and rates.  The proposals addressing the child tax credit and repealing the alternative minimum tax will have little impact on farm and ranch taxes.  Combined, the two provisions amounted to $23 million for farm tax filers in 2015, or 0.7 percent of reported adjusted gross income that year.

At this point, because all the details on tax brackets and rates are not known, the implications of federal tax reform for farmers and ranchers are difficult to grasp.  The changes to business taxes will also have implications for farm and ranch operations.  Future Tidbits will highlight provisions in the unified framework for businesses and other taxes that might impact farmers and ranchers.  Tidbits will also return to the topic of changes for individual filers when more is known on changes to brackets and tax rates.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Summertime in the Landscape…

garden lanscape toolsWhen it comes to Nebraska weather, we all tend to forget how quickly our feelings can switch. Only six months ago many of us might be heard complaining about how cold it was outside. Many pleaded for Mother Nature to give us a bit of warm weather to remind us spring would soon return. But, then every year once spring arrives we may be pleading for Mother Nature to change the weather again. A perfect example would be the spring of 2014 and the wettest May on record. Moreover, a few years ago we were entering the beginnings of the 2012 Drought. The soil was parched, plants were withering, and many lawns were turning brown. It seems like many years Nebraska weather can be similar and quite different at the same time.

While this spring and early summer have been enjoyable, there is not anything quite like summer in Nebraska. The old adage “If you don’t like the weather – wait five minutes – it’ll change” certainly comes to mind. Every year Mother Nature eventually turns up the heat and sends us more normal summer weather and that normal weather will drive many of us into the cool respite of air conditioning and outside searching for shade to avoid the heat.

Front Pg - Farmers Market 2July and August for many is a time for vacations, celebrating the Fourth, and enjoying the sweet taste of vegetables from our vegetable gardens. For those of us in the nursery industry we spend our time helping clients try to keep their landscapes and gardens looking their best. For some that could mean dealing with disease and insects, while for others it could mean assistance with caring for their plants, and for others installing new plantings. Yes, I did say planting.

While the summer is not a time to “plant and forget,” it can be a great time to plant. Many have extra time and possibly some help from kids out of school or are simply spending more time at home caring for their kids over the summer. While some days bring terrible heat, most summer mornings or early evenings will bring moderation to the heat making it enjoyable to be out working in our landscapes and gardens.

When we talk about planting in the summer, it is with some understanding and care. Simply put, people who plant in the summer usually tend to care for their plants better than those who wait for fall. The nicer weather in spring encourages people to believe that Mother Nature will take care of new plants without our help. We see our plants standing strong and tall and mistakenly believe that we won’t have to do much because the plants are looking great. However, with our Nebraska summers we need to make sure we care for our plants, whether we planted them last fall, this spring, or this summer. Keep an eye on any plant younger than about 12 months, ensure you water them about once or twice a week and you should do fine.

watering lawnFor those who are itching to add a few plants or simply have finally found time to work in the landscape, summer planting can be rewarding and offer great success with proper care. A young plant, whether it is planted in the cool spring or the hot summer, simply needs a bit of assistance to make sure it survives until it can set its roots and begin caring for itself. How long this takes will depend on the plant. Check with your local nursery professional for specific care instructions for your specific plantings.

When it comes to caring for your older plants while they should not need, as much supervision, do not worry if they are not looking as good as they did in the spring. A bit of timely watering, maybe some trimming to shape the plant, and a bit of mulch to help hold the moisture around the root system can do wonders to help them through the summer. With a bit of care, plants showing stress in the heat should perk right back up and yes, even thrive, in our challenging summers.

Now when we talk to clients about summer plant care the first thing we mention is to try to walk the landscape at least once a week even in the heat. Check for weeds, look for insect or disease issues, and generally try to catch problems before they can get out of hand. A bit of work in the heat could solve a problem with minimal effort versus waiting until the weather is cooler but now the problems have grown and it might take lots of work to get things back in shape. Many of our clients usually do this walk around when they mow their lawn.

As you walk your landscape, keep an eye out for insects eating on foliage, red spider on evergreens, the jalapeno shaped husks of bagworms on evergreens, turf damage from grubs or webworms, and fungal issues on roses, turf, or other plants. Most problems, if noticed before too much damage occurs or pests are allowed to get out of control, can be controlled with timely treatment. While many chemicals are labeled for many different plants and pests, do always follow label directions and consider consulting a nursery professional with any questions and to get help picking the right control for your situation.

DSCN3725If you are able to check on your plants once or twice a week through the summer adding a bit of water as needed and can deal with any problems before they get out of hand, you should be able to keep your plants growing well and looking good even in the heat of summer.

Overall Mother Nature can be our best friend or worst enemy. Which one we believe she is all depends on what she brings us each day, and I for one have said a few choice words about her already this year. However, if we are there to care for our plants here and there, the summer time in Nebraska can be an enjoyable and often fulfilling time in the landscape.

 

Andy Campbell is manager of Campbell’s Nurseries Landscape Department. A Lancaster County Farm Bureau Member, Campbell’s, a family owned Nebraska business since 1912, offers assistance for all your landscaping and gardening needs at either of their two Lincoln garden centers or through their landscape design office. www.campbellsnursery.com.