A drop in crop prices that hurt farmers cut into income statistics across much of the Midwest.
Personal income growth in Minnesota and several nearby states stalled in the second quarter of the year as farm income dropped.
Falling crop prices pushed farm income down 15 percent, or $1.2 billion, while overall income in the state rose just one-tenth of one percent to $256.8 billion, according to data released Monday by the U.S. Department of Commerce.
Farmers account for less than 3 percent of personal income in Minnesota, but fluctuations in crop prices can swing their incomes enough in either direction to affect the overall figures. A farmer who had corn laid up at $7.50 per bushel in December would have had to report a lower price per bushel by the end of the second quarter.
“It’s down to $5.75, which is still a good price, but it’s a big loss in terms of your potential income,” said Michael Swanson, an agricultural economist in Minneapolis for Wells Fargo. “That’s the risk that farmers take in terms of holding onto corn. … It’s a high-volatility way to live.”
Nebraska, Iowa and South Dakota were the only three states in the country that saw personal income fall in the second quarter, reflecting the broader effects of crop prices on farm income. Minnesota and North Dakota were the two slowest-growing states among those where personal income grew, and collectively the Plains was the weakest region in the country in the second quarter.
In Minnesota, wages and salaries grew $630 million in the second quarter, or half a percent. Personal income in most industries — including construction, manufacturing, professional services, real estate and finance and insurance — increased.
“Yeah, farm income was way down, and government was pretty much flat, as could be expected with the sequester,” said Toby Madden, an economist at the Federal Reserve Bank of Minneapolis. “It’s not like a big destruction of Minnesota’s economy.”
It was the second straight quarter of weak personal income figures in Minnesota, after income fell in the first three months of the year.
The decline then was mostly due to the expiration of a two-year federal payroll tax holiday, and an end-of-2012 rush to report income before a tax hike hit high earners at the beginning of 2013. Income from dividends, interest and rent — that is, income for people who own stocks and property — fell 4 percent in the first quarter.
That changed in the second quarter, as income from dividends, interest and rent rose 2.9 percent.
Over the past five years, personal income grew at an annualized rate of 2.7 percent in Minnesota, which puts the state 16th in the nation. Tops in the country is North Dakota, where personal income has grown at a rate of 9.5 percent over the past five years. South Dakota, the District of Columbia, Alaska and Texas round out the top five.
Adam Belz • 612-673-4405 Twitter: @adambelz