Net farm income at sizzling pace

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BY ART HOVEY / Lincoln Journal Star

Government economists issued their first state-by-state estimates for 2007 net farm income Thursday, and Nebraska and other prominent corn and soybean states were at near-record levels.

Even though analysts of agricultural trends tend toward cautious language, Bruce Johnson sees room for some exceptions as he sifts through numbers this big.

“What’s happened is cash receipts for the agricultural sector have just shot up — like unbelievably,” said Johnson, an agricultural economist at the University of Nebraska-Lincoln.

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Corn (top left) and soybeans carpet the rolling fields near Greenwood in July 2007. (AP file)

In Nebraska, “the latest estimates on total cash receipts, the value of agricultural sector production in 2007, is $16.1 billion. And, on average, we were running around $10 billion from 1990 up through 2002.”

Even though livestock have long been the largest source of ag income in Nebraska, grain-based ethanol and grain exports are altering that equation. That transformation is likely to be underscored, Johnson said, as national numbers for 2008 net farm income are released next week.

By current expectation, “the cash receipts of the crop sector will exceed those of the livestock sector in 2008 for the first time on record.”

Nebraskans in the non-farm sector grow more and more oblivious to day-to-day developments on farms and ranches. But as other sales sectors have gone sour, even those who normally tune out on agriculture might be realizing how much it matters in propping up the overall economy.

As measured Thursday, Nebraska’s 2007 net farm income was 152 percent of the 10-year average.

Greeley banker Bill McQuillan doesn’t need any reminding about how much farm income means in the nation’s midsection.

 “I think agriculture is, and always will be, a major component of this state’s ability to survive,” McQuillan said. “Really, it’s what we do.”

Impressive as Nebraska’s 2007 numbers are, they fall a bit short of 2004 and 1996 in the annual rankings. That’s largely because high grain prices have knocked a sizable hole in livestock profits and because they have cut down substantially on government crop subsidies.

Johnson said federal farm payments for 2007 in the state are only about a third of what they were earlier in this decade.

“Previously, where the crop sector was just hanging on and we were getting up to $1.4 billion in government payments to produce $2 corn for year after year after year, now, all of a sudden, we’ve doubled the grain prices and the farm program has basically taken second fiddle.”

The best thing to be said about 2007 farm income is that 2008 might be better.

“I do believe, because of what we’ve seen over a three- to four-year time period, that we’ve moved into a new era of demand conditions worldwide,” Johnson said, “and, to be sure, ethanol is playing into this.”

That’s not to say prosperity looks endless to Greg Ibach, director of the Nebraska Department of Agriculture, or to George Beattie, president of the Nebraska Bankers Association.

Rapid increases in the cost of seed, fuel and fertilizer cast doubt on that scenario.

“I think the scary part about price levels where they are right now, and input costs, the way they’ve escalated, it misleads the general public into thinking that farmers are going to continue to have this level of profit — because they won’t, starting from here on out,” Ibach said.

Higher costs are pushing many farmers further into borrowing mode, he said.

Beattie said that’s certainly not true of everybody. But he’s mindful of the risk that goes with all the money flowing into and out of farmers’ pockets.

If grain prices fall, “I don’t see input prices retracing as quickly as commodity prices might.”

Reach Art Hovey at 473-7223 or at ahovey@journalstar.com.