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State government treasury and cities' business streets feel agriculture's recession

PIERRE -- The boom in South Dakota's agricultural economy ended in 2014. Tough times became the story last year and now this year too. According to data from the state Bureau of Finance and Management, farm and ranch income plummeted from $3.8 bi...

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A farmer works a field northeast of Mt. Vernon on Wednesday morning. (Matt Gade/Republic)

PIERRE - The boom in South Dakota's agricultural economy ended in 2014. Tough times became the story last year and now this year too.

According to data from the state Bureau of Finance and Management, farm and ranch income plummeted from $3.8 billion in 2011 to $2.6 billion in 2014.

Then it kept falling to $1.1 billion in 2015. The 2016 estimate is lower yet at $900 million.

Mike Held from the South Dakota Farm Bureau said farm income is the biggest reason why state and city governments lately have received less sales tax revenue than expected.

"I'm not sure anyone was predicting another $200 million, 18 percent decrease in farm income for 2016," Held said.

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"The decrease in livestock income has turned out to be greater than any projections that I saw," he added.

Nationally, domestic beef supplies have been building up, and prices for cattle producers have been dropping too, while live cattle imports have been going down.

Imports fell 16 percent in 2015 from the prior year. For January through September of 2016, they were 18 percent below the 2015 numbers for the similar period.

Meanwhile U.S. beef exports rose 8 percent for the first nine months of this year, but the value increased just 5 percent, undercut by a weaker U.S. dollar.

The U.S. Department of Agriculture expects U.S. beef production to rise about 5 percent in 2016 and climb 3 percent in 2017.

Cattle prices this autumn were off about 25 percent from a year ago. Hog prices were down considerably too. Poultry prices remain low after disease outbreaks in the past year scared some foreign buyers.

The conditions reduced demand for farm ground, hay land and pastures in South Dakota this year.

Selling prices for cropland showed their first retreat in at least four years, while range and hay ground saw a smaller rate of increase, according to Extension Service farm and ranch specialists at South Dakota State University.

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In a July newsletter, Jack Davis and Shannon Sand wrote that the corn price was down 52 percent from the previous year while wheat and soybeans at that point had fallen about 40 percent. (Soybeans have since shown a recovery.)

"The sharp decreases in crop prices and slower decrease in crop input prices have continued to pressure crop production margins and farm profitability," Davis and Sand wrote.

"South Dakota crop farmers and ranchers have experienced declines in net farm income. The reduction in crop production margins and livestock profitability is reflected in this year's demand for land," they continued.

In another newsletter Davis and Sand reported that working capital - current assets minus current liabilities - climbed $346 per acre in South Dakota from 2009 through 2012, peaking at $505, for farms enrolled in the South Dakota Center for Farm and Ranch Management program.

From 2013 through 2015, it's been around $230, they said.

They warned: "If 2016 losses are large, farmers could see working capital move to a marginal level. Vulnerable farms may see operating credit severely restricted such that 2017 production will not be possible without substantial cuts in direct costs and in cash rents."

The latest economic roundup issued by the state Bureau of Finance and Management showed what happened to crop prices as of July: "Soybean prices were $9.66 or $0.34 higher compared to a year ago. Corn prices were $3.40 or $0.13 lower, while wheat prices received were $3.82 or $1.30 lower than the same month a year ago."

Many South Dakota farmers have several seasons of corn and wheat harvests sitting in bins and bags waiting for a time when prices seem more right, while some soybeans have been moving in recent weeks.

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Gov. Dennis Daugaard delivers his budget recommendations to a joint assembly of the Legislature on Tuesday. His budget office reported state tax revenues in total were $20 million below forecast at this point, running behind more and more each month from July through October.

The rural slowdown has found its way into the cities too, according to state Department of Revenue reports.

For the past fiscal year, which ended June 30, none of the 10 largest cities reached 5 percent growth in municipal sales tax revenue. Watertown declined by 0.52 percent. Mitchell grew just 0.82 percent. Aberdeen edged up 1.10 percent. Yankton, Sioux Falls, Brookings and Rapid City managed to break past 4 percent.

The sluggishness persisted into this fall. Pierre, Mitchell and Huron showed less municipal sales tax revenue in October than one year before. Rapid City was up 1.45 percent. Aberdeen rose 1.77 percent. Best were Watertown up 5.81 percent and Brookings up 5.14.

"It's scary times," Jerry Vogeler, of Fort Pierre, a lobbyist for the South Dakota livestock auction markets, told the state Animal Industry Board during a meeting Tuesday.

On the web:

The October city sales tax report is at

The" target="_blank">bit.ly/2gJMtul.

The fiscal year city sales tax report is at " target="_blank">bit.ly/2fMIo6x.
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