Forecast State Receipts Adjusted Downward . . .

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The Nebraska Economic Forecasting Board (NEFAB) on Oct. 27 adjusted its state revenue forecasts downward resulting in a budget shortfall of roughly $195 million for the current budget biennium.  NEFAB revenue forecasts are used by state senators to set the state spending.  Senators adopted a biennial budget earlier this year, but because they are required by the constitution to balance the budget, the decrease in forecast revenue means budget adjustments will be necessary during the 2018 legislative session in order to balance.

NEFAB revenue forecasts declined $100 million for the current fiscal year and $123 million for fiscal year 2018-19.  NEFAB projects revenues to grow, but at a slower rate than it forecast in April when it last met.  In April, it projected revenues to grow 5.6 percent in FY2017-18, and 5.4 percent in FY2018-19.  Most of the slowdown in revenues is due to lower individual income tax revenues.  Actual revenue growth averaged 0.3 percent over the last two fiscal years.  Historically, state tax revenues have grown at an average rate of 4.7 percent.  The chart below shows the state’s percentage revenue growth since 1982.  Note, the chart still reflects the NEFAB forecasts made in April.
tax receipts and budget

The state’s revenue growth is generally thought to be a good reflection of economic activity in the state.  The Legislative Fiscal Office said in its August budget report, “Beside inflation, this revenue growth over time reflects the ebb and flow of economic activity and economic cycles.  It reflects new businesses created and existing businesses that close.  It reflects new products and services added to the tax base and existing products and services that are eliminate or expire.  The key is the net impact.  The new or expanded businesses, products or services more than offsets those that decline or disappear.”  In looking at the chart, it’s easy to spot the economic downturns which have occurred in the past, 1986, 2002-03, and 2009-10.  The most recent decline in revenue growth, though, is different in that it has occurred while the state’s overall economy continues to grow.

So how does the latest NEFAB forecasts reflect on the Nebraska economy?  First, it’s probably reflective of the ongoing struggles in agriculture, which accounts for over one-fourth of the state’s gross domestic product.  While there are signs farm income may have hit a bottom, nobody is forecasting robust growth in near future for agriculture.  Second, it’s probably a reflection that the Nebraska’s economy is like the overall U.S. economy.  Economic growth is expected to continue, but at sluggish pace.  Thus, the projections of revenue growth greater than 5 percent like those made by NEFAB in April just isn’t in the cards.

 

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.

Latest Crop Production Estimates . . .

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This year’s Nebraska corn production is forecast to be 1 percent less than last year, and soybean production is forecast to be 1 percent more, according to the latest USDA- NASS estimates released on Thursday.  The latest estimates peg Nebraska corn production at 1.683 billion bushels and soybean production at 316.4 million bushels, a record for the state.  U.S. corn production is forecast at 14.3 billion bushels, down 6 percent from last year, while soybean production is forecast at a record 4.43 billion bushels, up 3 percent from last year.  The percentage changes in production for Nebraska crops are shown in Table 1.
Table 1. Percentage Change in Crop Production, 2016 to 2017

 Corn  -1 %
 Soybeans  +1 %
 Sorghum  – 19 %
 Dry Edible Beans  +49 %
 Sugar beets  +1 %
 Sunflowers  – 4 %
 Alfalfa Hay  + 4 %

Corn and soybeans together typically account for 90 percent of Nebraska’s total crop cash receipts.  As such, changes in revenues for these commodities, along with changes in beef sector revenue, will dictate the overall health of the state’s agricultural economy.  Calculations using the latest USDA production and price estimates suggest cash receipts received by corn and soybean producers could be less for this year’s crop.  Combined receipts for the two crops are estimated to decrease $389 million, or 4.48 percent from last year.  Revenue for the 2017 corn crop is estimated to be $325 million less, or 5.69 percent; revenue for the 2017 soybean crop will be $64 million less, or 2.16 percent less. The reduction in revenue would result in an estimated 0.61 percent reduction in net farm income, or $30.7 million, assuming corn and soybean receipts as a percentage of net farm income is the same as the average from 2008 to 2015.  The decline doesn’t necessarily mean total net farm income for the state will be down, as the beef feedlot sector has enjoyed positive returns for awhile this year.  But any positive returns in the beef industry or other commodity sectors must overcome the declines in corn and soybeans revenues to result in an uptick in income for the state.

 

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.

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.

It’s Official-Nebraska Farm Income Dropped for 2016 . . .

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The USDA Economic Research Service on August 30 released its official estimate of Nebraska net farm income for 2016.  The official estimate, $3.78 billion, is nearly $1 billion less than net farm income earned for 2015, and off almost 50 percent from net farm income reported for 2011.

farm income

In fact, 2016 net farm income is just slightly higher than the amount earned for 2010.  A decline in livestock receipts, about $2.1 billion, was the primary reason for the drop in net farm income.  Cash crop receipts were off slightly, but almost equal to that received in 2015.  Farm expenses were down also which helped compensate for the loss of revenue.

The cost of livestock purchases was down $1.7 billion, due to lower cattle prices, and fertilizer and insurance costs were also lower.  It was the third consecutive year net farm income declined in Nebraska, and unfortunately the most recent University of Nebraska estimate suggests 2017 net farm income will be down for a fourth consecutive 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 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.

Nebraska Economy Stumbles in First Quarter . . .

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The Bureau of Economic Analysis (BEA) at the U.S. Department of Commerce reported Nebraska’s gross domestic product (GDP) shrunk 4 percent in the first quarter of 2017 compared to the fourth quarter of 2016.  Nebraska had the worst first quarter economic performance of any state. The BEA attributed the dismal economic performance to the slumping agricultural sector.  Other plains states, also dominated by agriculture, saw their economies shrink in the first quarter as well.  Iowa’s economy contracted 3.2 percent; South Dakota’s fell 3.8 percent; and Kansas fell 0.7 percent.  Texas saw the greatest first quarter growth at 3.9 over the fourth quarter.  The country as a whole saw real GDP increase 1.2 percent in the first quarter, and the BEA’s first estimates real GDP growth for the second quarter at 2.6 percent.

tidbits 8-1

Not all the news on the economic front was bad for Nebraska. Governor Ricketts and the Nebraska Dept. of Labor announced Nebraska’s monthly increase in non-farm employment in June was 0.6 percent, the third highest in the nation.  Nebraska’s non-farm employment in June reached 1.031 million jobs.  Also, the Bureau of Business Research at the University of Nebraska-Lincoln reported that its most recent leading economic indicator predicts rapid economic growth later this year.  The indicator is a composite of economic factors like building permits for single-family homes, airline passenger counts, manufacturing hours, and the value of the dollar.  All components of the indicator rose in June, resulting in an increase in the economic indicator of 2.75 percent, suggesting a rapidly growing Nebraska economy at the end of the year.

Nebraska’s agricultural economy will continue to struggle in 2017.  The most recent projection indicates 2017 net farm income will fall 16 percent, the fourth consecutive year net farm income will have fallen.  Thus, agriculture will continue to dampen the state’s economic growth.  The first quarter numbers are surely evidence of this fact.  However, it appears the non-farm economy is picking up steam, offsetting the agriculture slump which should help the state post modest economic growth soon.

 

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.

Nebraska County Export Values . . .

 

Economic Tidbits logoInternational trade and foreign markets are critical to Nebraska agriculture.  To get a sense of which Nebraska counties are most reliant on international trade, the Nebraska Department of Agriculture has created a map showing export values by county for select commodities (see below).  Commodities included are beef and beef products, corn, dairy products, distillers grains, ethanol, pork and pork products, pulses, sorghum, soybeans and soybean products and wheat.  The map was created using 2015 Nebraska cash receipts data and attributing shares to counties based on county production data.  Platte County topped the state with export values of $245 million.  Custer, Holt, Boone and Cuming Counties fall in the next tier with export values between $125-$150 million.  Most counties in Nebraska generate at least $25 million in export values, which no doubt contributes significantly to their local economies.

The top counties stand to gain the most from increased access to foreign markets.  Free trade agreements with Mexico, Canada, Korea, Colombia and others, while benefitting all counties, have been particularly beneficial to these counties.  An analysis last year of the benefits of the TransPacific Partnership (TPP) by Nebraska Farm Bureau showed many of these same counties would have benefited from the $378 million in increased receipts Nebraska was projected to receive under the agreement.  The map clearly demonstrates it is in the interest of Nebraska agriculture to continue to press for more open international markets in agricultural products.
county exports

 

Jay 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.

Nebraska Farm Bureau Young Farmers and Ranchers Maintain Optimism in the Face of Tougher Economic Times

YF&R_DCtrip

Left to right: Matt & Elizabeth Albrecht, Brian & Amy Gould, James & Katie Olson, Todd & Julie Reed

The future of agriculture relies upon the ability of young people to maintain and grow their farms and ranches. While the recent downturn in the agricultural economy could lead one to be pessimistic about the future, after a recent National Affairs visit to Washington D.C., the Nebraska Farm Bureau Young Farmers and Ranchers Committee, continue to remain optimistic about the years ahead.

“Given the importance of agriculture to the overall health of Nebraska’s economy, it isn’t hard to see why Nebraska has successfully weathered and even prospered through the economic uncertainty of the past. Yet, recent USDA projections of an over 30 percent reduction in net farm income, as compared to 2013, along with continued tax and regulatory challenges, could signal trouble on the horizon. These continued challenges make it more important than ever for our state’s young farmers and ranchers to speak out about the challenges they face on their operations,” Steve Nelson, president of Nebraska Farm Bureau said.

“Of particular concern is a 33 percent rise in operating debt since 2012. As farmers and ranchers are adding debt, they have also been drawing down financial assets, such as cash or equity. Young and new farmers and ranchers are of particular concern as their ability to handle such a downturn is significantly less than a well-established farmer or rancher,” Nelson said.

However, with great challenges comes even greater opportunities. Throughout the trip, increased agricultural trade, Trans Pacific Partnership (TPP), was highlighted as a way to provide a necessary boost to the agricultural economy. Passage of TPP continues to be a Farm Bureau priority. According to analysis conducted by the American Farm Bureau (AFBF), the TPP will increase annual net farm income by $4.4 billion and increase U.S. agricultural exports by $5.3 billion per year.

“Nebraska also stands to make significant annual gains from the TPP with a $378.5 million increase in ag cash receipts and a $229.2 million boost to ag exports. According to the Nebraska Farm Bureau analysis, Cuming, Custer, Platte, Dawson, and Lincoln counties would be among the biggest winners under TPP, as those counties would each experience more than $10 million in additional cash sales of agriculture commodities per year once TPP trade protocols are fully enacted. Congress needs to pass the TPP quickly as we continue to lose market share in many of the TPP member nations each day this agreement is not in place,” Nebraska Farm Bureau Young Farmers and Ranchers Committee Chairman Todd Reed said.

Another issue front and center during the trip was the GMO Labeling bill, which passed the U.S. House of Representatives while the group was in town. This important piece of legislation will help provide certainty to food companies who would have been unable to work through a patchwork of state GMO labeling laws.

“As with all compromises, there are pieces we like and pieces we don’t. The bill’s mandatory nature continues to be a problem for us, however we simply could not allow a system of state-based GMO labeling to occur. While not perfect, the Roberts-Stabenow compromise bill will set a national standard on GMO labeling utilizing digital disclosure technologies,” Reed said.

Besides visiting with Nebraska’s Congressional Delegation, the Nebraska Farm Bureau Young Farmers and Ranchers met with the Federal Aviation Administration to discuss recently released rules regarding the commercial use of “unmanned aircraft systems”, or “drones”, and met with CropLife America and Syngenta to discuss the latest efforts to remove the well-known product Atrazine from their toolbox of crop protection products.

“The list of challenges young farmers and ranchers face is no doubt long. However, the need for young producers to answer the call of growing food for our nation and world remains as strong as ever. Continuing to communicate our message to key decision makers is vital to the future success of our nation as well as for farm and ranch families,” Reed said.

Those attending the National Affairs visit are:

Steve Nelson, president Nebraska Farm Bureau – Kearney/Franklin County

Todd and Julie Reed, chairman YF&R Committee – Lancaster County

Brian and Amy Gould, District 3 representative YF&R Committee – Cedar County

Matt and Elizabeth Albrecht, District 7 representative YF&R Committee – Dawson County

James and Katie Olson, District 6 representative YF&R Committee – Holt County