Farm incomes in Nebraska over the next two years will continue to decline from 2011's record levels, but state economic forecasters say that they expect steady economic and job growth across most of state's industries through 2015.
The report projects a decline in farm income levels this year and in 2014, but a stabilization in ag income after that, which may indicate a "new normal" for Nebraska agriculture.
In its latest long-range report, the Nebraska Business Forecast Council said it anticipates Nebraska's total job growth to be 1.3% by the end of 2013, and then tick up to 1.5% in 2014 and 1.6 percent in 2015. Those employment predictions are unchanged from the council's February forecast.
Despite the expectation of overall progress on jobs, the rate of income growth for Nebraska's non-farm workers is expected to dip in 2013. This slowdown--from 4% in 2012 to 2.2% in 2013--will result from the expiration of the temporary cut in the payroll tax rate this year. But forecasters expect income growth in the state to accelerate in 2014 (by 4.4% and 2015 (by 4.6%).
Nebraska farm incomes are a separate matter, according to Eric Thompson, director of the Bureau for Business Research at the University of Nebraska-Lincoln College of Business Administration, which publishes the semi-annual report. Farm incomes in the state are forecast to drop to $5.2 billion in 2013 (a 3.7% decline from 2012), then to $5 billion in 2014 (a further 3.8% decline) and remain at $5 billion in 2015, according to the council's forecast.
The gradual dissipation of drought across the Corn Belt has led to suggestions that corn prices will fall substantially by harvest, which could mean a $1.5 billion to $2 billion reduction in net earnings for Nebraska corn producers, a drop that will last into future years, Thompson says. Farm incomes also will be affected in coming years when a new farm bill removes direct farm subsidy payments, which are worth about $400 million a year.
Nebraska, however, has a relatively unique counter-balancing effect--it has major crop production sectors and major livestock production, so reduced crop revenues would mean reduced input costs for the livestock sector, helping it return to profitability, according to the report. Those gains could allay a considerable portion of the lower crop earnings, forecasters said. This rebalancing of income flows between the crop and livestock sectors would be more sustainable, and ethanol producers would also benefit from lower corn prices.
"A rebalanced Nebraska agriculture sector would maintain farm income near $5 billion per year," Thompson says. "This amount is effectively the 'new normal' for Nebraska agriculture."
The report also indicates that Nebraska's food processing industry will see steady growth via demand from and investment by foreign markets. Manufacturing industries that sell primarily to the region's farm sector are likely to see some drop in sales as farm incomes return to more normal levels. Overall, the state will benefit from increased foreign demand for food products and strong growth in the energy sector. Non-durable goods employment is forecast to rise at or near 1 percent each year through 2015.
The full report is available in Adobe Acrobat PDF format.