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Economic challenges for 2017 farming will be varied

By Staff | Mar 29, 2017

Ernie Goss

EMMETSBURG – The business of farming has enough challenges from weather and commodity prices, and every producer wonders what each growing season will bring – not only in yields and growing conditions, but also financially.

According to Dr. Ernie Goss, professor of economics at Creighton University in Omaha, Nebraska, there will be plenty of challenges for farmers in 2017.

“Higher inflation, higher interest rates, higher value of the U.S. dollar are just a few factors to look at for this coming year,” Goss said. “But add in less competitively priced ag exports overseas due to President Trump’s trade skirmishes, repatriation of earning abroad, infrastructure spending that invites rate hikes from the Federal Reserve and the election of Marie LePen in France will all factor in to the ag picture, too.”

According to Goss, inflation is currently running at 2.5 to 3 percent, but there was a 16 percent reduction in cash rent rates for farmland during the last year. But at the same time, housing prices are going up from 6 to 7 percent, setting up a huge divergence between urban and rural interests in the ag economy.

“One key thing to remember is that farm receipts tie directly to the value of the dollar,” Goss said. “Farm receipts go down when the value of the dollar goes up. Iowa has experienced negative export growth, down 9.9 percent from 2014 to 2016, due to the rising value of the dollar.”

Using research on a 10-county region of North Central Iowa centered in Fort Dodge, Goss said that region has 4.5 percent of the population in the state, but produced 22.5 percent of the state’s agricultural production.

According to Goss, the Greater Fort Dodge Region produces 15 percent of the state’s livestock, but has just .8 percent of the processing capacity. The region had $298 million in pork exports in 2015, and did total ag product exports of $3.3 Billion in 2015.

“The problem is you have to send your product away for processing,” Goss said. “With the upcoming construction of the Prestage Pork Plant in Eagle Grove, that will alleviate some of that issue, but it still remains a key factor in the economic growth of the region.

“Another area the region is in desperate need of is housing. But overall, you couldn’t be more positive in this area.”

Goss told producers to watch the yield on 10-year Treasury Bonds as an indicator for the economy.

“If inflation rises,” he said, “the yield rises with it. You want to see slow growth because when risk goes up, investors go to bonds.”

Other factors to watch, according to the economist, are the Consumer Price Index, value of the dollar, the March jobs report, the next meeting of the Federal Reserve Board of Governors and most importantly, the upcoming elections in France.

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