Home / Opinion / Ag still important to North Dakota

Ag still important to North Dakota

By: Rob Port | Bakken.com

“North Dakota is in an enviable position and will outperform the U.S. for the next several years thanks to its booming energy industry,” reads a recent economic report from Moody’s distributed to state legislators and other leaders.

That’s not exactly surprising news. Every month it seems the State of North Dakota sets a new oil or natural gas production record. Not to mention a new record for population growth or income growth or economic development.

It’s gotten to the point that a new headline about record-setting oil production or mind-blowing economic growth is met with a shoulder shrug from North Dakotans. But here’s something from the aforementioned economic report that should grab some attention from citizens of the Peace Garden State.

“The pace of job growth has plateaued just below 3% year over year, after cooling from a high of nearly 10% in mid-2012,” read the report. “This is still nearly twice the national average, despite having already added nearly 80,000 jobs to pre-recession peak levels. Personal income growth has similarly decelerated dramatically in recent months but remains roughly twice the national average.”

What’s going on? It’s not the energy sector, which is still roaring. Rather, it’s the industry that has historically been central to the state’s economy.

“Falling agricultural prices are largely to blame, pulling down growth in farm proprietors’ income from 150% to 5% year over year, in a matter of just two quarters,” read the Moody’s report.

What’s going on with agriculture? To put it simply, a market correction. In recent years droughts in other places in the world have diminished supplies, driving up crop prices. But the larger impact has come from the federal government’s Renewable Fuels Standard, which is a mandate for ethanol blends. The artificial demand created by the RFS, which is opposed by the oil industry, has driven up prices not just for corn but also all the other crops that have been displaced by growers looking to cash in on what seems, to this observer at least, to be an ethanol bubble.

But the feds are backing off the ethanol mandate, and the international market for crops is strengthening, which means that the 50% increases in farm land values and 100% increases in farming income are likely done for the foreseeable future.

And, as important as oil has become to North Dakota’s economy, the state is still very much a farm state. The impact on future economic growth could be ugly.

Leave a Reply

Your email address will not be published. Required fields are marked *