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Falling Ag Prices Part of Gloomy Forecast for SD Economy and State Revenue

A couple of charts in state economist Jim Terwilliger's presentation to the South Dakota Banking Commission last Friday explain part South Dakota's doldrummy fiscal outlook.

Screen Shot 2014-12-11 at 11.02.57From 1997 to 2007, farm income averaged about 6% of South Dakota's personal income. When ethanol boomed, so did crop prices, and the farm percentage of our income grew to almost 11% by 2011. In 2013, it was back down to 9.2%.

Corn dropped 40% in 2013 and is down another 6.7% this year; oilseed is also down (OPEC strikes again!). Corn and wheat futures have dropped back to the trough they dropped into right after the recession. Hmm... imagine how much worse corn prices could have been if the Chinese resolved their grain-storage shortage and stopped losing so much corn to mold.

Screen Shot 2014-12-11 at 11.03.17Average farm income under Daugaard has been double the average farm income under Rounds; equipment tax collections have tripled from the Rounds-era midpoint. Low farm prices will bend down, not boost, those returns.

Those curves may not bend down as far as we fear. Thanks to all those pastures getting plowed for corn, fewer cattle are out there, taking beef prices to an all-time high. Until the market rebalances, ranchers who held beef stand to make some money. Now if we just hadn't let those schemers run that beef plant in Aberdeen into bankruptcy, we might have a nice surfboard to ride that beef wave for even more economic activity.

5 Comments

  1. jerry 2014.12.11

    Sometimes a one trick pony goes lame.

  2. Wayne Pauli 2014.12.11

    3 words:
    Rainy Day Fund
    1st verb phrase:
    Use it
    2nd verb phrase:
    Quit penalizing the common folks
    enough of the chicken little routine that Daugaard is so quick to use. be a leader, take on some risk. Support your residents, do not continue to beat them down with your negativity.

  3. leslie 2014.12.13

    could that $500,000 joop and benda negotiated and took from NBP and hid it in escrow, prevented the slid into bankruptcy?

  4. caheidelberger Post author | 2014.12.13

    The slide into bankruptcy was more than just the money Joop and Richard took from Future Fund Grant #1434. It was the overall mismanagement (remember: David Kang says Bollen and James Park were running NBP, not CEO David Palmer and the on-paper management team) that allowed NBP construction to run four years late and make $167 million in investment capital and state support disappear. NBP went bankrupt because it ate a lot more money than it needed to get up and running.

  5. leslie 2014.12.13

    was the timing such that competent state control over EB5 in NBP could have made the difference, or was it privatization into joop's hands that did it? NSU profs. certainly had the expertise. i know this is 2nd guessing.

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