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.

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“Economist should be spelled echonomist, because they all repeat each other.” Jason Kintz

Agriculture Economic Tidbits can now be found on the Nebraska Farm Bureau website. If a past item in Tidbits caught your attention, and you want to re-read it, it can now be found on the web at www.nefb.org. From the menu across the top of Farm Bureau’s home page, click on the Newsroom tab and Tidbits will appear on the list of choices under the tab. The Tidbits page features archived stories beginning with January of this year and will be updated each week.

The University of Nebraska Agricultural Economics Department annual real estate survey shows the average market value of agricultural land in Nebraska declined 3 percent this year compared to last year. The average land value is now $2,650 per acre. This marks the fifth consecutive year of declines in value as market values have dropped approximately 20 percent since reaching a high of $3,315 in 2014. The annual February survey conducted by the department questions land industry professionals in Nebraska on land market happenings.

American Farm Bureau and 23 other organizations recently released a report showing that America’s food and agriculture sectors support over 22 million jobs, or 15 percent of U.S. employment. These 22 million jobs grow to over 45 million jobs when supplier and other economic multiplier effects are considered and total output from agriculture and food sectors exceeds $7 trillion. The report, 2019 Food and Agriculture Industries Economic Impact Study, estimates the economic contribution of the food industry to the U.S. economy in 2019. This includes businesses involved in food agriculture, food manufacturing, food wholesaling, and food retailing. John Dunham & Associates conducted the research.

Christine Lagarde, Managing Director of the International Monetary Fund (IMF), described the world’s economy as facing a “delicate moment” in a recent speech to the U.S. Chamber of Commerce. Lagarde said growth in the global economy is slowing, and for this year, the IMF expects 70 percent of the world economy to experience a slowdown in growth. In January, the IMF projected global growth for this year and next at 3.5 percent, but that is likely to be ratcheted down in the next forecast. Lagarde says the slowdown in global growth is largely due to rising trade tensions and tightening of financial conditions by the world’s central bankers.

“This ‘ability’ to explain that which we cannot predict, even in the absence of any additional information, represents an important, though subtle, flaw in our reasoning. It leads us to believe that there is a less uncertain world than actually might be.” Amos Tversky quoted in The Undoing Project, Michael Lewis, W.W. Norton & Company, 2017.

Agriculture Economic Tidbits can now be found on the Nebraska Farm Bureau website. If a past item in Tidbits caught your attention, and you want to re-read it, it can now be found on the web at www.nefb.org. From the menu across the top of Farm Bureau’s home page, click on the Newsroom tab and Tidbits will appear on the list of choices under the tab. The Tidbits page features archived stories beginning with January of this year and will be updated each week.

Extreme winter weather in February and March and the devasting floods two weeks ago have hit Nebraska ranchers hard. Cold temperatures, rain, freezing rain, snow, high winds, and blizzard conditions have pummeled Nebraska resulting in higher mortality rates for both cows and calves this year. Even before the flooding, anecdotal reports suggested death losses for calves as high as 20-25 percent this year. The normal mortality rate for calves in Nebraska is 5 percent according to the USDA Farm Service Agency (FSA).

The Livestock Indemnity Program (LIP) administered by the USDA Farm Service Agency (FSA), can provide compensation to offset the abnormal death losses experienced this year. In a recent BeefWatch piece, Jay Parsons and Aaron Berger of the University of Nebraska Extension Service give an example of how LIP can assist producers. Parsons and Berger use an example of a beef producer with 400 pregnant cows. The producer could expect to lose 5 cows and 20 calves in a typical year. This year, due to adverse weather conditions, the producer loses 7 cows and 32 calves. Under LIP, the producer could receive compensation for 12 calves and 2 cows, losses over and above what is considered normal. Parson and Berger calculate the producer, based on 2018 payment rates, could receive $983.90 for each cow, and $468.92 for each calf lost, roughly 40 percent of the value of the calf.

Most Nebraskans realize the state is near the top in the nation in the production of corn, soybeans, beef, and hay. But most Nebraskans probably don’t know Nebraska is also near the top in the nation in production of greenhouse tomatoes. Nebraska’s production of greenhouse tomatoes tops 10 million pounds each year according to the USDA Economic Research Service (ERS) which ranks the state, along with California, Minnesota, and New York, as a leading producer in the country. The growth of greenhouse tomato production in the country has been a recent phenomenon. Greenhouse production did not register on a USDA survey of tomato shipments in 2000. However, in the most recent survey in 2017, greenhouse tomato shipments accounted for more than 5 percent of all tomato shipments.

Agricultural Economist David Widmar recently tackled the topic of which crops globally are most reliant on agricultural trade in an Agricultural Economic Insights blog. Widmar converted global imports data from the USDA into an acre equivalent and then calculated the share of a crop’s annual harvested acres comprised by imports. The results can be found in the figure below. According to this measure, soybeans is most reliant on trade with imports equaling 43 percent of the world’s harvested acres. Trade also plays a significant role for wheat as imports account for 24 percent of its harvested acres. World imports of Nebraska’s largest crop, corn, accounted for less than 15 percent of the world’s harvested acres.

“Productivity in agriculture was 270 percent greater in 2017 than in 1948, and 136 percent greater than 1990, while total farm inputs were mostly unchanged from 1948, and only marginally higher than in 1990, according to USDA’s Economic Research Service.” Agriculture and Greenhouse Gas Emissions, Dr. John Newton, AFBF Market Intel, March 5, 2019.

The labeling of foods containing GMO ingredients is one of the more controversial policy issues agriculture confronted in recent years. Several states either passed mandatory label requirements or were considering such requirements. The issue was resolved with the passage of federal legislation requiring labeling and providing for national standards for the label. Research on market reactions to mandatory labels has shown labels will have impacts in markets.

The federal crop insurance program is a growing portion of the federal budget, amounting to roughly $8 billion per year. So, when federal budget cutters are searching for budget cuts, crop insurance often gets mentioned as a potential source. An idea often suggested to reduce the cost of federal crop insurance is to impose caps on premium subsidies, the argument being large farms do not need to be subsidized by the federal government to purchase crop insurance. Opponents to caps on premium subsidies argue the policy will result in large farms exiting the program. Large farms are less risky, they argue, and if less-risky farms leave the insurance risk pool, the level of risk increases resulting in higher premiums for farmers remaining in the program.

UNL agricultural economists’ analysis of the livestock production value in Nebraska and the corresponding direct economic impact found that livestock is a “yuuuuuge” part of Nebraska agriculture. Glennis McClure and Brad Lubben estimate the direct economic impact of livestock production in Nebraska at $8.5 billion, and the total economic impact is $13.8 billion. And the $13.8 billion might be on the light side. McClure and Lubben say the estimate is conservative because it does not include the economic impact and wage income of related sectors. 

“Fewer than 1 percent of people in the U.S. have a wheat allergy, and few than 1 percent have celiac disease, an autoimmune disorder that requires sufferers to refrain from gluten . . . Nonetheless, at least one in five Americans regularly chooses gluten-free foods, according to a 2015 poll. Sales of products with gluten-free labels rose to $23 billion worldwide in 2014 up from $11 billion in worldwide in 2010.” Relax, You don’t need to ‘Eat Clean’, Aaron Carroll, Nov. 4, 2017. New York Times Sunday Review Opinion.

This year’s legislative discussions on property tax reform have largely focused on property taxes used to fund schools. Schools in Nebraska levy over $2 billion in taxes each year, representing 60 percent of the total taxes collected statewide. However, farmers’ and ranchers’ school taxes typically represent 70-75 percent of their total tax bill because they do not pay city property taxes. The chart below illustrates the growth in general fund taxes levied by schools between school years 2006-07 and 2018-19. The figures are estimates calculated by Nebraska Farm Bureau based on general fund levy and valuation data from the Nebraska Department of Education and Nebraska Department of Revenue. The estimates do not include bond levies or special building fund levies. The blue and orange bars show the amount of taxes levied on agricultural land, residential property, all other property sectors combined, and total taxes in school years 2006-07 and 2018-19. The numbers above the bars show the percentage increases in taxes between the two school years

A report by the Purdue University Global Trade Analysis Project shows the President Trump’s decision to withdraw from the Trans Pacific Partnership (TPP) has cost the nation’s farmers and agricultural industries $1.8 billion per year in lost exports. The report also notes the other TPP participators have decided to move forward with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), giving several U.S. agricultural competitors better access to key export markets. Countries participating in the CPTPP will increase trade with each other and U.S. exports will suffer. The analysis shows the pork, poultry, and dairy sectors will be most impacted.

Climate change and greenhouse gas (GHG) emissions continue to be a “hot” topic in public discourse in the U.S. and across the globe. As a part of the discussion, various sectors’ GHG emissions are being increasingly scrutinized, livestock production being one of these sectors. A recent AFBF Market Intel piece by Dr. John Newton provides insight into agriculture’s contribution to GHG emissions using data from the USDA Economic Research Service and EPA’s GHG Inventory Data Explorer. When measured by sector, agriculture represented 9 percent of all GHG emissions in the U.S. in 2017, totaling 582 million metric tons. The transportation sector is the largest GHG contributor, accounting for 29 percent of all emissions. Crop cultivation represents 50 percent of agriculture’s GHG emissions, and livestock production contributes roughly 42 percent. About two-thirds of the livestock emissions are methane emissions. In total, methane emissions from livestock represent about a quarter of total U.S. methane emissions, or 2.5 percent of total U.S. GHG emissions.

“Here, clearly, was another source of error: not just that people don’t know what they don’t know, but that they don’t bother to factor their ignorance into their judgements.” The Undoing Project, Michael Lewis, W.W. Norton & Company, 2017.

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?