Nebraska’s 1999 net farm income levels document what people in the industry already knew – 1999 was not a good year for the agricultural economy. According to the recently released 1999 USDA net farm income statistics, Nebraska’s 1999 aggregate net farm income was estimated at $1.66 billion. This total falls 10 percent below the 1998 figure and nearly 18 percent below the annual average of the 1990’s (Table 1)

Burkholder, Jared

Johnson, Bruce B.

English

DigitalCommons@University of Nebraska

University of Nebraska - LincolnDigitalCommons@University of Nebraska - LincolnCornhusker Economics Agricultural Economics Department8-23-2000State’s Net Farm Income Levels Tell Quite A StoryBruce B. JohnsonUniversity of Nebraska-LincolnJared BurkholderUniversity of Nebraska-LincolnFollow this and additional works at: http://digitalcommons.unl.edu/agecon_cornhuskerPart of the Agricultural Economics CommonsThis Article is brought to you for free and open access by the Agricultural Economics Department at DigitalCommons@University of Nebraska -Lincoln. It has been accepted for inclusion in Cornhusker Economics by an authorized administrator of DigitalCommons@University of Nebraska -Lincoln.Johnson, Bruce B. and Burkholder, Jared, "State’s Net Farm Income Levels Tell Quite A Story" (2000). Cornhusker Economics. 882.http://digitalcommons.unl.edu/agecon_cornhusker/882CornhuskerEconomicsAugust 23, 2000Cooperative ExtensionInstitute of Agriculture & Natural ResourcesDepartment of Agricultural EconomicsUniversity of Nebraska -- LincolnState’s Net Farm Income Levels Tell Quite A StoryMarket ReportYrAgo4 WksAgo 8/18/00Livestock and Products, Average Prices for Week EndingSlaughter Steers, Ch. 204, 1100-1300 lb  Omaha, cwt.. . . . . . . . . . . . . . . . . . . . .Feeder Steers, Med. Frame, 600-650 lb  Dodge City, KS, cwt. . . . . . . . . . . . . . .Feeder Steers, Med. Frame 600-650 lb,   Nebraska Auction Wght. Avg. . . . . . . .Carcass Price, Ch. 1-3, 550-700 lb  Cent. US, Equiv. Index Value, cwt.. . . .Hogs, US 1-2, 220-230 lb  Sioux Falls, SD, cwt. . . . . . . . . . . . . . .Feeder Pigs, US 1-2, 40-45 lb  Sioux Falls, SD, hd. . . . . . . . . . . . . . . .Vacuum Packed Pork Loins, Wholesale,     13-19 lb, 1/4" Trim, Cent. US, cwt. . . .Slaughter Lambs, Ch. & Pr., 115-125 lb  Sioux Falls, SD, cwt. . . . . . . . . . . . . . .Carcass Lambs, Ch. & Pr., 1-4, 55-65 lb  FOB Midwest, cwt. . . . . . . . . . . . . . . . .$65.4579.00*102.7636.00*105.9485.38182.00$67.1095.50106.52105.28*46.61134.0086.50187.50$65.3384.00105.92101.4144.50*120.70*168.00Crops, Cash Truck Prices for Date ShownWheat, No. 1, H.W.  Omaha, bu. . . . . . . . . . . . . . . . . . . . . .Corn, No. 2, Yellow  Omaha, bu. . . . . . . . . . . . . . . . . . . . . .Soybeans, No. 1, Yellow  Omaha, bu. . . . . . . . . . . . . . . . . . . . . .Grain Sorghum, No. 2, Yellow  Kansas City, cwt. . . . . . . . . . . . . . . . . .Oats, No. 2, Heavy  Sioux City, IA , bu. . . . . . . . . . . . . . . . .2.761.604.243.061.112.871.494.442.671.272.821.474.362.751.18Hay, First Day of Week Pile PricesAlfalfa, Sm. Square, RFV 150 or better  Platte Valley, ton. . . . . . . . . . . . . . . . . .Alfalfa, Lg. Round, Good  Northeast Nebraska, ton. . . . . . . . . . . .Prairie, Sm. Square, Good  Northeast Nebraska, ton. . . . . . . . . . . .86.00*57.50117.5080.0072.50115.0077.5077.50* No market.Nebraska’s 1999 net farm income levels documentwhat people in the industry already knew – 1999 was nota good year for the agricultural economy. According to therecently released 1999 USDA net farm income statistics,Nebraska’s 1999 aggregate net farm income was estimatedat $1.66 billion. This total falls 10 percent below the 1998figure and nearly 18 percent below the annual average ofthe 1990’s (Table 1).Despite a return to some profitability in the livestocksector (particularly beef) in 1999, the nearly $300 millionturnaround in animal output from 1998 to 1999 simplycould not compensate for the $750 million downturn in thevalue of Nebraska’s 1999 crop output. This, in combina-tion with rising production expenses of nearly $300million, led to a situation of serious economic conse-quences buffered only by government program payments.These government payments are indeed an importantpart of this financial story. The USDA calculated a record$1.32 billion of direct government payments flowing intoNebraska’s farm sector in 1999. This amount was morethan twice the annual average of government payments forthe 1990s. Even more sobering is that those paymentsconstituted the equivalent of 80 percent of Nebraska’stotal net farm income – a proportion that has not beenremotely approached since the depth of the 1980s farmcrisis. Nebraska is not unique in terms of 1999 paymentlevels. In seven other states, including several Corn BeltStates, their 1999 direct government payments actuallyexceeded their 1999 aggregate net farm income levels.As for 2000, major crop commodity prices have notrebounded. In fact, prices have worsened from a year agodue to high production volumes forecasted for 2000. Recent Farm Service Agency projections suggest pay-ments coming into Nebraska’s farm sector this year ofmore than $1.7 billion, of which nearly half will be in theUNIVERSITY OF NEBRASKA-LINCOLN, COOPERATING WITH THE COUNTIES AND THE U.S. DEPARTMENT OF AGRICULTUREUniversity of Nebraska Cooperative Extension educational programs abide with the non-discrimination policies of theUniversity of Nebraska-Lincoln and the United States Department of Agriculture.form of loan deficiency payments (LDPs). Given weather-reduced yield levels in Nebraska, and significant increasesin farm expenses for energy and interest payments onshort-term debt, we may easily see a situation for 2000 inwhich total direct government payments may constitute theequivalent of 95 percent or more of Nebraska’s aggregatenet farm income. As one Nebraska crop producer re-marked recently, “the program payment is the only marginleft.”What can we make of these aggregate income accountsthat have shown such pronounced shifts in recent years?There are a number of observations that can be made.First, we must realize that these aggregate financialindicators do not accurately reflect the economic situationsfor all Nebraska producers. As initially noted, livestockproducers experienced some return to profit in 1999, andthat has generally continued into this year (if not con-founded by drought). There are also some cash-cropproducers who (by good management and/or good fortune)are positioned to see reasonable income levels for thisyear. At the same time, many producers are being chal-lenged by weather and other factors while seeing commod-ity prices at historic lows. For these producers, the directgovernment program payments they receive will beinsufficient to cover the economic shortfalls. This is adifficult economic time for many agricultural producersand the effects will ripple across the rural economies ofthe state.Second, we need to reflect on these financial accounts andrealize  how  economically   dependent   and  vulnerable Nebraska is to the political forces that shape farm policyat the federal level. Production agriculture is by nature ahigh-risk business; and we have conventionally presumedthat federal farm programs represent a form of economicsafety-net to buffer some of that risk. However, given thecurrent dependency levels revealed and the political windsthat are blowing, one wonders if, in fact, farm programpolicy has only compounded the economic risk exposureof Nebraska agricultural producers.Third, one needs to ask the following question: What issustainable in the longer run? With the end of the currentFreedom to Farm Act in 2002 and the initial spirit of thatlegislation which intended to remove government interven-tion and allow market forces to work, now is certainly notthe time for a “business-as-usual” attitude. Uncertaintyabounds over future policy. In recent years, the globalcompetition on the supply side of the market has onlyintensified in combination with rather modest worlddemand increases. This has led to lower and lower market-clearing prices for the major crop commodities. In essence,the U.S. farm sector is moving into uncharted waterswhere future farm policy must be carefully crafted withinthe parameters of global market forces. This may lead tosignificant economic adjustments for U.S. productionagriculture, including some recapitalization of assets(lower land values and rents), to a level where we canagain see U.S. producers competing in a sustainable range global market equilibrium.Bruce Johnson, (402) 472-1794 Professor, Dept. of Ag EconomicsJared Burkholder, Student AssistantDept. of Ag EconomcisTable 1. Net Farm Income and Direct Government Payment Series for Nebraska, 1990-1999. Year   Direct Government Payments                  ($1,000)           Net Farm Income                    ($1,000)Government Payments as % of Net Farm Income1990199119921993199419951996199719981999$624,646        $490,659        $478,729        $806,273        $348,246        $507,302        $388,738        $454,549        $796,933        $1,322,091        $2,506,179     $2,293,807     $2,512,118     $1,984,643     $2,111,457     $1,611,434     $3,426,814     $2,063,421     $1,847,139     $1,663,931     25.0%21.4%19.1%40.7%16.5%31.5%11.3%22.0%43.1%79.5%Ave. 1990-99 $621,817        $2,020,380     30.8%Source: USDA - Economic Research Service

State’s Net Farm Income Levels Tell Quite A Story

UNL | Libraries

University of Nebraska - Lincoln
DigitalCommons@University of Nebraska - Lincoln
Cornhusker Economics Agricultural Economics Department
8-23-2000
State’s Net Farm Income Levels Tell Quite A Story
Bruce B. Johnson
University of Nebraska-Lincoln
Jared Burkholder
University of Nebraska-Lincoln
Follow this and additional works at: http://digitalcommons.unl.edu/agecon_cornhusker
Part of the Agricultural Economics Commons
This Article is brought to you for free and open access by the Agricultural Economics Department at DigitalCommons@University of Nebraska -
Lincoln. It has been accepted for inclusion in Cornhusker Economics by an authorized administrator of DigitalCommons@University of Nebraska -
Lincoln.
Johnson, Bruce B. and Burkholder, Jared, "State’s Net Farm Income Levels Tell Quite A Story" (2000). Cornhusker Economics. 882.
http://digitalcommons.unl.edu/agecon_cornhusker/882
Cornhusker
Economics
August 23, 2000
Cooperative Extension
Institute of Agriculture & Natural Resources
Department of Agricultural Economics
University of Nebraska -- Lincoln
State’s Net Farm Income Levels Tell Quite A Story
Market Report
Yr
Ago
4 Wks
Ago 8/18/00
Livestock and Products,
 Average Prices for Week Ending
Slaughter Steers, Ch. 204, 1100-1300 lb
  Omaha, cwt.. . . . . . . . . . . . . . . . . . . . .
Feeder Steers, Med. Frame, 600-650 lb
  Dodge City, KS, cwt. . . . . . . . . . . . . . .
Feeder Steers, Med. Frame 600-650 lb,
   Nebraska Auction Wght. Avg. . . . . . . .
Carcass Price, Ch. 1-3, 550-700 lb
  Cent. US, Equiv. Index Value, cwt.. . . .
Hogs, US 1-2, 220-230 lb
  Sioux Falls, SD, cwt. . . . . . . . . . . . . . .
Feeder Pigs, US 1-2, 40-45 lb
  Sioux Falls, SD, hd. . . . . . . . . . . . . . . .
Vacuum Packed Pork Loins, Wholesale,  
   13-19 lb, 1/4" Trim, Cent. US, cwt. . . .
Slaughter Lambs, Ch. & Pr., 115-125 lb
  Sioux Falls, SD, cwt. . . . . . . . . . . . . . .
Carcass Lambs, Ch. & Pr., 1-4, 55-65 lb
  FOB Midwest, cwt. . . . . . . . . . . . . . . . .
$65.45
79.00
*
102.76
36.00
*
105.94
85.38
182.00
$67.10
95.50
106.52
105.28
*
46.61
134.00
86.50
187.50
$65.33
84.00
105.92
101.41
44.50
*
120.70
*
168.00
Crops,
 Cash Truck Prices for Date Shown
Wheat, No. 1, H.W.
  Omaha, bu. . . . . . . . . . . . . . . . . . . . . .
Corn, No. 2, Yellow
  Omaha, bu. . . . . . . . . . . . . . . . . . . . . .
Soybeans, No. 1, Yellow
  Omaha, bu. . . . . . . . . . . . . . . . . . . . . .
Grain Sorghum, No. 2, Yellow
  Kansas City, cwt. . . . . . . . . . . . . . . . . .
Oats, No. 2, Heavy
  Sioux City, IA , bu. . . . . . . . . . . . . . . . .
2.76
1.60
4.24
3.06
1.11
2.87
1.49
4.44
2.67
1.27
2.82
1.47
4.36
2.75
1.18
Hay,
 First Day of Week Pile Prices
Alfalfa, Sm. Square, RFV 150 or better
  Platte Valley, ton. . . . . . . . . . . . . . . . . .
Alfalfa, Lg. Round, Good
  Northeast Nebraska, ton. . . . . . . . . . . .
Prairie, Sm. Square, Good
  Northeast Nebraska, ton. . . . . . . . . . . .
86.00
*
57.50
117.50
80.00
72.50
115.00
77.50
77.50
* No market.
Nebraska’s 1999 net farm income levels document
what people in the industry already knew – 1999 was not
a good year for the agricultural economy. According to the
recently released 1999 USDA net farm income statistics,
Nebraska’s 1999 aggregate net farm income was estimated
at $1.66 billion. This total falls 10 percent below the 1998
figure and nearly 18 percent below the annual average of
the 1990’s (Table 1).
Despite a return to some profitability in the livestock
sector (particularly beef) in 1999, the nearly $300 million
turnaround in animal output from 1998 to 1999 simply
could not compensate for the $750 million downturn in the
value of Nebraska’s 1999 crop output. This, in combina-
tion with rising production expenses of nearly $300
million, led to a situation of serious economic conse-
quences buffered only by government program payments.
These government payments are indeed an important
part of this financial story. The USDA calculated a record
$1.32 billion of direct government payments flowing into
Nebraska’s farm sector in 1999. This amount was more
than twice the annual average of government payments for
the 1990s. Even more sobering is that those payments
constituted the equivalent of 80 percent of Nebraska’s
total net farm income – a proportion that has not been
remotely approached since the depth of the 1980s farm
crisis. Nebraska is not unique in terms of 1999 payment
levels. In seven other states, including several Corn Belt
States, their 1999 direct government payments actually
exceeded their 1999 aggregate net farm income levels.
As for 2000, major crop commodity prices have not
rebounded. In fact, prices have worsened from a year ago
due to high production volumes forecasted for 2000. 
Recent Farm Service Agency projections suggest pay-
ments coming into Nebraska’s farm sector this year of
more than $1.7 billion, of which nearly half will be in the
UNIVERSITY OF NEBRASKA-LINCOLN, COOPERATING WITH THE COUNTIES AND THE U.S. DEPARTMENT OF AGRICULTURE
University of Nebraska Cooperative Extension educational programs abide with the non-discrimination policies of the
University of Nebraska-Lincoln and the United States Department of Agriculture.
form of loan deficiency payments (LDPs). Given weather-
reduced yield levels in Nebraska, and significant increases
in farm expenses for energy and interest payments on
short-term debt, we may easily see a situation for 2000 in
which total direct government payments may constitute the
equivalent of 95 percent or more of Nebraska’s aggregate
net farm income. As one Nebraska crop producer re-
marked recently, “the program payment is the only margin
left.”
What can we make of these aggregate income accounts
that have shown such pronounced shifts in recent years?
There are a number of observations that can be made.
First, we must realize that these aggregate financial
indicators do not accurately reflect the economic situations
for all Nebraska producers. As initially noted, livestock
producers experienced some return to profit in 1999, and
that has generally continued into this year (if not con-
founded by drought). There are also some cash-crop
producers who (by good management and/or good fortune)
are positioned to see reasonable income levels for this
year. At the same time, many producers are being chal-
lenged by weather and other factors while seeing commod-
ity prices at historic lows. For these producers, the direct
government program payments they receive will be
insufficient to cover the economic shortfalls. This is a
difficult economic time for many agricultural producers
and the effects will ripple across the rural economies of
the state.
Second, we need to reflect on these financial accounts and
realize  how  economically   dependent   and  vulnerable 
Nebraska is to the political forces that shape farm policy
at the federal level. Production agriculture is by nature a
high-risk business; and we have conventionally presumed
that federal farm programs represent a form of economic
safety-net to buffer some of that risk. However, given the
current dependency levels revealed and the political winds
that are blowing, one wonders if, in fact, farm program
policy has only compounded the economic risk exposure
of Nebraska agricultural producers.
Third, one needs to ask the following question: What is
sustainable in the longer run? With the end of the current
Freedom to Farm Act in 2002 and the initial spirit of that
legislation which intended to remove government interven-
tion and allow market forces to work, now is certainly not
the time for a “business-as-usual” attitude. Uncertainty
abounds over future policy. In recent years, the global
competition on the supply side of the market has only
intensified in combination with rather modest world
demand increases. This has led to lower and lower market-
clearing prices for the major crop commodities. In essence,
the U.S. farm sector is moving into uncharted waters
where future farm policy must be carefully crafted within
the parameters of global market forces. This may lead to
significant economic adjustments for U.S. production
agriculture, including some recapitalization of assets
(lower land values and rents), to a level where we can
again see U.S. producers competing in a sustainable range 
global market equilibrium.
Bruce Johnson, (402) 472-1794
 Professor, Dept. of Ag Economics
Jared Burkholder, Student Assistant
Dept. of Ag Economcis
Table 1. Net Farm Income and Direct Government Payment Series for Nebraska, 1990-1999. 
Year
   Direct Government Payments
                  ($1,000)
           Net Farm Income 
                   ($1,000)
Government Payments as 
% of Net Farm Income
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
$624,646        
$490,659        
$478,729        
$806,273        
$348,246        
$507,302        
$388,738        
$454,549        
$796,933        
$1,322,091        
$2,506,179     
$2,293,807     
$2,512,118     
$1,984,643     
$2,111,457     
$1,611,434     
$3,426,814     
$2,063,421     
$1,847,139     
$1,663,931     
25.0%
21.4%
19.1%
40.7%
16.5%
31.5%
11.3%
22.0%
43.1%
79.5%
Ave. 1990-99 $621,817        $2,020,380     30.8%
Source: USDA - Economic Research Service


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State’s Net Farm Income Levels Tell Quite A Story

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