Minnesota farmers face a "bubble" that potentially could devastate the state's economy, a new report says.
Though crop prices are at record highs, expenses have soared, too - setting up both farmers and the state economy for a huge hit if crop prices drop sharply, according to Minnesota 2020.
The St. Paul-based think tank released its report, "Minnesota's Bubble Economy," at a news conference Tuesday in Fargo.
"We need to make sure we do everything we can to prevent our ag economy from collapsing," said Matt Entenza, a former Minnesota DFL House leader and founder and board chairman of Minnesota 2020.
The report was researched and written by Lee Egerstrom, a Minnesota 2020 Economic Fellow and a former St. Paul Pioneer Press ag and business reporter.
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According to the report:
"Minnesota agriculture is riding high - perhaps too high to be sustainable. Clearly, price bubbles are forming around agriculture and commodities that threaten the long-term health of Minnesota's huge food and agriculture economy."
Food and agriculture account for one-quarter of all Minnesota jobs, counting farming, processing, transport and retailing, the report says.
Egerstrom said rising expenses, including higher land prices, which roughly doubled from 2001 to 2007, mean farmers have more to lose if crop prices fall.
The current situation resembles that of the agricultural boom in the 1970s, which was followed by a major downturn in the 1980s, said Tracy Beckman.
Beckman, a former Minnesota state senator and once state director for the U.S. Department of Agriculture, also spoke at the news conference.
The report has three recommendations to minimize damage from a major ag downturn:
- Farmers, lenders and their financial advisers should be cautious.
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- State officials should make sure the University of Minnesota Extension farm debt mediation program has the staff and resources to help farmers in a crisis.
- Minnesota should "mount a preemptive, coordinated study now, before a crash happens."
The research would help determine what state programs could be useful and how to create greater awareness about risks in the current market.
"Minnesota 2020 believes that all concerned about the health of agriculture and rural Minnesota should prepare now for a roller-coaster ride with the farm economy," the report says.
Readers can reach Forum reporter Jonathan Knutson at (701) 241-5530
