Dennert to Trump: Don’t Pull Plug on SD Ag with Mexico Trade War

Some of my northeastern legislators appear to be reading the blog! Following my post on the harmful impacts a Trump-tweet-trade war with Mexico could have on South Dakota agricultural economy (that’s Steve Bannon’s “economic nationalism“), District 3 rookie Representative Drew Dennert found a moment amidst the House’s Crossover Day craziness to introduce House Concurrent Resolution 1012, a measure calling on Il Duce to “welcome fair trade and support strong trade commerce within the agricultural industry.”

Citing the same stats I did, HCR 1012 reminds the President and Congress that “our friends to the south” buy $394 million in South Dakota goods, supporting 15,000 jobs (at least a thousand times more ongoing jobs than Keystone XL will create in South Dakota).

Co-sponsoring Representative Dennert’s temperate missive to the White House are my Trumpy neighbor Senator Al Novstrup, Senator Steven McCleery and Representative Jason Frerichs from District 1, and Senators Ewing, Klumb, Otten, and Sutton.

One minor error: HCR 1012 opens with the oft-repeated line that “agriculture is the number one industry in South Dakota and has roughly a $26 billion economic impact yearly.” False: our total GDP in 2015 was $47 billion, and agriculture did not generate over half of that. Depending on how you slice sectors, agriculture is the sixth-largest generator of direct GDP. Here are South Dakota’s industry sectors by GDP:

Industry 2015 GDP (millions USD)
Finance and insurance 7,274
Government 5,348
Manufacturing 4,537
Real estate and rental and leasing 4,278
Health care and social assistance 4,164
Agriculture, forestry, fishing, and hunting 3,506
Retail trade 3,505
Wholesale trade 3,424
Professional and business services 2,881
Construction 1,983
Accommodation and food services 1,472
Information 1,245
Transportation and warehousing 1,126
Other services, except government 1,009
Utilities 786
Arts, entertainment, and recreation 290
Educational services 288
Mining 128

18 Responses to Dennert to Trump: Don’t Pull Plug on SD Ag with Mexico Trade War

  1. As well written and analyzed below – the US is either going to import labor or import food. You pick.

    Farm wages are up 36% last decade and are rising even faster.

    Nice bunt in voting against your interest . . . farmers, food buyers . . .

  2. John, we have the chosen 35 hired guns to bring the jobs here so that answers your question. The good news though is that with farm wages up 36% and still with shortages, wages will have to be raised double that with benefits. We all know where this is going, higher subsidies so we can still make 50 choices for cereal at the supermarket. Winning!

  3. Darin Larson

    Cory, your figures for Agricultural GDP in South Dakota in the table must be incorrect. There is no way agricultural GDP was only $3.5 billion in SD in 2015.

    The 2015 corn crop was worth roughly $2.5 billion and the 2015 soybean crop was worth roughly $2 billion. That is $4.5 billion in GDP and we haven’t considered cattle, hogs, dairy, alfalfa, wheat, poultry and eggs, honey, etc.

  4. Put Kristy on it! Oh, wait! Missing in action!

  5. Roger Elgersma

    The food will get to the mouths. The midwestern ag states were conned into these bad trade deals by threatening that we could not sell corn unless we let them steal our jobs. So now the jobs left and the wages are down and a small town has a very hard time to get a factory anymore. If we raise the trade tariff so our workers are protected, we will still sell grain. If a few countries like Mexico buy corn somewhere else, we will sell into the same supply and demand situation in a world with the same number of mouths. The food will get to the mouths. No country will let their people starve because that is the quickest guarantee to rebellion, by letting the people starve. Trust that business will get the food to the mouths. And protect our workers and their jobs and their wages.

  6. No worries you voted for Trump he w ill take care of you.Honey will roll like the oceans into the farmers bank accounts .Trump says he can fix the farm program and Isis so trust him to watch out for you.

  7. Darin, what did the BEA miss in its count?

  8. Roger E, will the food get to the mouths if we deport all the pickers? Americans may not go hungry, but John’s article notes that if we deport all of the undocumented produce pickers, we’ll get our produce from overseas:

    A crackdown may not have a great effect on consumer prices, [Farm Bureau’s Zippy] Duvall said in a separate Bloomberg Radio interview, because retailers may simply substitute imports for domestic goods. But U.S. agriculture, and the rural communities that supported Trump in his bid for the White House, would be upended by policies that would no longer make America the first choice for migrant-dependent crops, he said [Alan Bjerga and Patricia Laya, “Trump’s Deportation Policy Stands to Drive Up Farm Wages,” Bloomberg, 2017.02.24

    And then if Trump slaps a tariff on imported food, well, his electorate goes to war with the President.

    Drew Dennert’s resolution doesn’t mention immigration, but in a broader sense, on this issue, Dennert may be smarter than Trump: our agricultural sector depends on its connections to the global economy.

  9. Cutting the numbers of legal immigrants in half, as proposed by 2 flawed senators, amounts to a national death wish when one looks at facts outside the chamber.

    Reminder: every time sine 1900 when the nation on unified republican governance for 4 years resulted in the 3 largest financial crisis since 1900. Every. Time.

  10. mike from iowa

    mike from iowa said…
    Forbes Magazine recently reported that Republican lawmakers have buried a report by the nonpartisan Congressional Budget Office, because the findings debunked their preferred (fanciful) economic worldview.

    The research study found absolutely no correlation between the the level of top tax rates and economic growth. The belief that taxing the rich slows economic growth is a key tenet of conservative economic theory, so rather than considering evidence contrary to that theory, Senate Republicans suppressed the report.

    This has become the standard reaction of Republican lawmakers when inconvenient reality–facts, evidence, what your lying eyes tell you–conflicts with their preferred beliefs and/or the interests of their donors.


  11. Darin Larson

    Cory, the BEA definition of GDP within an industry subtracts the inputs of other industries. Here is the BEA definition of industry GDP:

    “In concept, an industry’s GDP by state, referred to as its “value added”, is equivalent to its gross output (sales or receipts and other operating income, commodity taxes, and inventory change) minus its intermediate inputs (consumption of goods and services purchased from other U.S. industries or imported).”

    Thus, you and the governor’s office are using different terms to define agriculture’s contribution to the SD economy. Your definition using the BEA information is based upon value added or more akin to net GDP contribution. I think in this case the BEA’s definition does not adequately reflect agriculture’s importance to the SD economy. Many of the other industries in SD trace much of their existence and success to production agriculture’s existence.

    For example, CPA’s who do farm and ranch taxes would not exist without the agricultural producers farming and ranching, but their professional fees reduce the GDP of agriculture as defined by BEA. All of the other industries that provide services or inputs to agriculture also owe their existence to production agriculture.

    $26 billion in economic impact is quite probably true, while BEA’s figures can be true as well. However, I think the $26 billion economic impact figure is more of a true reflection of agriculture’s importance to SD’s economy. A lot of the other industries absolutely depend on the dollars from agriculture for their existence.

  12. So what is South Dakota’s actual GDP, Darin? What is the gross output for all other sectors? Finance, education, manufacturing, health care—they all have intermediate inputs. what does that chart look like?

    Can’t you say modern production agriculture wouldn’t exist without CPAs to do their books, without doctors and nurses to keep them healthy, without SDSU researchers expanding ag tech, without K-12 and university teachers educating their kids and making them better businesspeople? It seems unfair to count all that interconnect money as agriculture’s sole domain. Why can’t I say every industry owes its existence to education and thus say that education contributes some triple-digit-billion to South Dakota’s economy?

    This “#1 industry” and more than half of GDP claim has always smelled propagandistic. What similar claims have the finance, health care, retail, and other sectors made about their total economic contributions? I’d just like to see all those numbers together so we could make an honest comparison.

  13. Darin Larson

    Cory, if there is no farm and ranch agricultural producers, there would be no need for the cpa. If there is no cpa, there is still a need for farm and ranch agricultural producers. Put slightly differently, if there is no cpa services, farms and ranches would still contribute to GDP. If there is no farm or ranch customers, many CPA’s would have no work.

    Under your preferred BEA definition, all of the farm and ranch agricultural output could be reduced to zero by the other industries that provide inputs to agriculture. That would not be a fair picture of agriculture’s importance to the state economy. To me, the BEA’s definition is inaccurate for the purpose that you are trying to use it for: i.e. to downplay the role of agriculture in our SD economy.

    The governor’s number of $26 billion may overstate agriculture’s impact in some respects, but I think it is a lot more accurate than BEA’s $3.5 billion.

    Your question of education being responsible for every industry is misplaced since GDP is a snapshot in time for economic output. GDP is not a value of the circumstances that contribute to GDP, like education. Education is an investment that will often pay off in economic terms, but it is not economic output in and of itself to any large degree. This is not to denigrate the value of education and educational spending. Saying that agriculture is vitally important to the SD economy is not to say that other things are not important.

    If you want to say that education is more important to our future in SD than our agricultural industry, I would even agree with you. However, you should agree that agriculture is the lifeblood of the SD economy currently and for the foreseeable future. This is especially so because of the lack of investment in and prioritization of education by our state leaders. When all of the states around us value education more than SD does, it is no wonder that our economy is not highly diversified and we struggle to grow or attract high tech industry.

  14. I’m still looking for the comparable inputs data for other sectors. If I can’t look at BEA’s straight GDP figures to compare sectors, then we have to have complete alternative data to make the quantitative claim that agriculture is South Dakota’s biggest industry.

    I’m not disputing “vitally important.” I’m disputing the superlative claim of “most important”.

  15. Darin Larson

    I think BEA’s data on “Gross Output” is the proper measure of the importance of an industry. Here is the definition and distinction from GDP.

    The problem is I can’t find state by state data for Gross Output–I find only national statistics.

  16. Darin! Thanks for that link; that explanation is very useful.

    GOED must get its gross output data from somewhere. We must be able to find it! Searching….

  17. …still no figures on gross output by sector by state, but let’s add personal income to the analysis:

    The Federal Reserve Bank of St. Louis says that proprietors’ farm income in South Dakota over the last few years has fluctuated wildly. At its peak in 2013 Q1, the seasonally adjusted annual rate was $3.7 billion. The most recent figure, 2016 Q3, was $600 million, lower than it was than through most of the last 26 years.

    Total personal income in 2013 Q1 was $37.9 billion. in 2016 Q3 it was $41.8 billion. Even as farm income has plunged over the last four years, total personal income has still risen, meaning some other sectors are pulling extra weight.

    In the boom year, farm income was about 10% of total income. Last year, farm income was 1.4% of total income.

    But as with GDP, those income figures appear to deal in net, not gross, so we’re talking about the money farmers have in their pockets to spend after they’ve bought seed, parts, fuel, etc. So these figures talk about what SD farmers have to spend at the grocery store and the movies, not what they’ve already spent at the seed and tractor supply shops.

    Another comparison: durable manufacturing paid wages of $1.2 billion in 2013 Q1 and $1.3 billion in 2016 Q3.

  18. Darin Larson

    We agree, net income and GDP by industry are net figures and similarly do not tell the whole story. If you know farmers, you know they hate to pay income tax, so they make investments in equipment, supplies, and livestock to manage their income tax burden. When they don’t have large net income issues because of low prices or low yields, they don’t invest money in machinery, supplies, vehicles, etc., etc.

    If you added up the gross farm sales from corn, soybeans, wheat, alfalfa, dairy, hogs and cattle, you would probably have 90% of gross farm output in SD. You could also look up the economic studies that I think the governor’s office cites from time to time. There must be a breakdown in there somewhere of the numbers.

    I assume the reason the BEA uses a net GDP figure by industry is so that the total of all industries equals the GDP for the entire state. On the other hand, the gross output figures would double count dollars that flow from one industry to another and the total of all industries would equal more than SD’s total GDP.

    However, if agriculture is “feeding” many of the other industries in our state, as I contend, gross output of agriculture should show this plainly in comparison to other SD industries.