Personal income growth in Minnesota and several nearby states stalled in the second quarter of 2013 as farm income fell, according to new data released Monday by the U.S. Department of Commerce.
It was the second straight quarter of weak personal income growth in Minnesota.
The problem in the first quarter could be explained mostly by 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.
The problem in the second quarter was falling crop prices. Income in the state actually rose slightly, up one-tenth of one percent to $256.8 billion, despite the $1.2 billion decline in farm income.
“What a lot of farm income is based on is balance sheet change,” said Michael Swanson, an agricultural economist in Minneapolis for Wells Fargo. “You can get some pretty wild changes on farm income, and you really don’t know until you sell it.”
A farmer who had corn in the bin at $7.50 per bushel in December would have been forced to cut the price 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,” Swanson said. “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 who saw their total personal income fall in the second quarter, reflecting the broader impact of farm income. Minnesota and North Dakota were the two slowest-growing states among those with a positive number.
In Minnesota, net earnings were down two-tenths of one percent, thanks mostly to the drop in farm income. Personal income in most other categories – construction, manufacturing, professional services, for instance -- was up slightly.
Income from dividends, interest and rent was up 2.9 percent in Minnesota.