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Dan Paulson is an agriculture and business banker as well as the senior vice president for American Federal Bank in Fosston, Minn.

No 'knockout blow': Ag economy examined

GRAND FORKS, N.D. — Many Upper Midwest agriculturalists have struggled through a difficult 2017 that has included widespread drought. Though generalizations are risky, one thing is clear, Andrew Swenson said.

Despite the 2017 challenges, "There hasn't been a knockout blow. Farmers and ranchers are still hanging in there," said Swenson, the veteran farm and family resource management specialist with the North Dakota State University Extension service.

Swenson spoke Oct. 16 at the annual extension Outlook for Agricultural Lenders in Grand Forks, N.D. About 90 ag bankers from northwest Minnesota and northeast North Dakota attended the event,which featured a half-dozen speakers, most from the extension service.

Upper Midwest agriculture remains in the adjustment period that began after the sharp downturn in farm profitability from record highs in 2012, a downturn that continued through 2014, Swenson said.

As part of that adjustment, costs, including average cropland values and some cropland cash rents, generally are coming down. So are family living expenses, he said.

One example of the latter: Farm households enrolled in the North Dakota Farm Business Education Program spent an average of $2,066 on clothes in 2016. That was 16.2 percent less than the $2,465 in 2013, when the area farm economy was slipping.

Inevitably, yields play a big role in how well farmers are doing, extension officials and ag bankers said. Better-than-average yields help to offset the current poor-to-mediocre prices, while below-average yields exacerbate unattractive prices.

Daniel Paulson, market president of the American Federal Fosston (Minn.) Bank, attended the Grand Forks event.

Yields in his immediate area generally were good, although "you don't have to go far away before you find some that aren't so good," Paulson said.

That complicates an analysis of how farmers overall are faring, he said.

Livestock prices have fared better than some expected, which helps, said Tim Petry, NDSU extension livestock marketing economist.

Area livestock producers who avoided the worst of the drought — and don't need to buy large amounts of feed for their animals — have a good chance of being profitable this year, he said.

Some drought-stricken parts of the region received substantial late-summer or fall rains, which, while not offsetting lost hay this summer, boosts pastures and the 2018 hay outlook, he said.

Nationally, about 13 percent of the U.S. cattle inventory is in area hit by drought. That's down from a high of 32 percent in November 2016, according to information from Petry.