Support for Arkansas Week provided by the Arkansas Democrat Gazette, the Arkansas Times and Little Rock Public Radio.

Hello again everyone and thanks very much for being with us our broadcast.

This edition has one overriding focus, the Arkansas economy, nestled as it is in a larger national, indeed global framework, multi state multinational business, Retail, AG and Tourism for all segments.

What the Federal Reserve didn't do this week was about as big as what it might have done.

Bottom line, no change in interest rates That has The latest measure of the Arkansas economy arrives the latest month's tax collections at the state level.

That follows a September report that was a few $1,000,000 below the same month a year ago, yet still better than projected.

Dr. Jeremy Horpadol of UCA Center for Economic Research joins us now.

Jeremy, same in this latest batch of of numbers below forecast, but still ahead of last year.

Yeah, that's that's right, Steve.

So the I always look at the forecast and last year think about the forecast for this year, they're only predicting 1% economic growth for this year.

So when we talk about what the forecast was, that budget is based on that forecast.

What we've seen, especially with the GDP report last week is growth is getting looking like it's be way more than 1%, which means that income tax collections are trending way above what they'd expected, which is why we're seeing these surpluses, right.

So they were expecting income taxes to be a little lower, lower both because of that growth rate and because of some of those tax cuts that are phasing in.

It looks like that's, that's all the numbers are looking good as far as that's concerned.

And this is of a piece one would say certainly in the last quarter anyway with US GDB growth which was scorching.

That's right.

Yeah, almost 5% was the most recent quarter.

That was as we got closer to the number coming out, that was the forecast, but that's not what people were forecasting months ago.

So that was a really good number.

Looking like the fourth quarter probably will not be quite as hot as that, but still looking at to be above the 1% that was built in these forecasts.

Yeah.

And the Federal Reserve decided, OK, it's still on fire, but we're at least for one month, we're going to put off another rate hike.

Yeah.

So them putting off the rate hike for another month was not that was not totally unexpected.

But what what the Chairman has said in his in his remarks made it sound like they're going to pause for a while that the economy is looking very strong, not just because of that GDP report but because of other data too.

So we may be seeing the Fed saying we're going to wait for months to see how much is growth going to keep going and is inflation going to keep going down for the near term anyway for Arkansas Reef for Arkansas entrepreneurs for Arkansas farmers for every tourism for that matter, interest rates what's what's what's likely to be the the immediate in impact.

Well we talked about interest rates for businesses or for buying a new home for consumers.

Those are going to stay high for a while as long as the Fed is is leaving rates where they are and they're going to be leaving those rates where they are for at least I would say the next year those those interest rates are going to stay high.

That produces some drag on the economy and that's why we've been expecting a recession now for over a year.

But it but it seems like other factors productivity has been high.

Those things have have kept the economy from going into recession even as growth slowed down a little bit.

But still the latest report is very good where whether it is at the arts Department of Finance or in the universities, the think tanks, even even the feds own staff.

What's going on?

I mean, the rules don't seem to apply.

Yeah, there's always a lot of things going on.

I think as I mentioned, productivity, we just got a productivity report this week.

It was way above above what we expected, way above trend.

Productivity is right now in the US economy is higher than would have been even if the pandemic hadn't happened.

So if we kept on the trend from the say the four or five years before the pandemic productivity, how much output we produce per per worker is much higher than we would have even expected if the pandemic had never happened.

And you still drive on Main Street through the shopping centers, those that are still open anyway and you see two of every three shop windows help wanted hiring.

Now absolutely the labor shortages and inflation are the two things that are really the the not good spots in the economy and they're the two things which might be making a lot of people not as confident as we would think they would be given the data.

Now, the labor shortages are a challenge for businesses.

But keep in mind, this is actually great for workers.

Wages have been going up faster than inflation in the past year, which we hadn't seen the past two years.

But now we're starting to see that as workers have more bargaining power, people are changing jobs, able to get nice raises.

So that that tightness in the labor market is a challenge for businesses.

And it makes them a little pessimistic, but it's it's been very helpful for workers.

3 words, United Auto Workers.

That's right.

I mean look at the, the historic raises, they've been able to negotiate you know after several years of not getting much, but they're they've been able to negotiate these massive pay packages and other benefits over the next three years.

So that is looking that you're seeing that kind of throughout the economy even in non unionized sectors.

Yeah.

And inflation is, it's down, it's down, it's, it's coming down.

Maybe not as quickly as we would like, of course not never.

You know, we're still away, away from 2%.

And you know for some things people will always ask, you know, when are we going to get back to the prices we saw a couple of years ago?

For a lot of things you might never see those.

But if you look at prices of staples like gasoline, eggs, milk, these are all down year over year.

If you look at natural gas to heat people's homes as we get into winter, it's a lot cheaper than it was last year.

So a lot of those things we actually are seeing not only inflation slowing as we are on average, but a lot of prices going down compared to what they were a year ago, not lower than they were three or four years ago.

But but we are starting to see some relief for consumers.

So much uncertainty in the world whether it's the Mideast whether it's Eastern Europe whether it's the NATO alliance quivering or is there any way to look 18 months, two years ahead and and see what is Mr. and misses Arkansas going to have to deal with at the supermarket at the auto dealership at the bank for that matter with their credit card receipts.

Yeah that's at least in the forecast that the Fed and other and others are looking at within within a year or 18 months like you say, we could be down to that 2% inflation rate which is you know our norm.

We had a we had expected before the what's happened in the past three or four years, that's what it's looking like.

So in 2% people might still say why can't it actually go down.

But getting down that level is where the Fed and other policy makers would say, we're now confident that we've got inflation under control and maybe we can start adjusting policy in a year, 18 months where interest rates can come down.

And to do that without having unemployment go up would be something of a miracle.

But it seems like it's becoming more and more a potential outcome that we'll see Got into there, Doctor.

Jeremy Harper, all from UCA.

Thanks as always for coming in.

Of course.

See you again soon.

Thank you.

And we'll be back with a closer look at the AG segment of Arkansas's economy.

Stay with us and we are back with more.

Now it is always AG time in Arkansas, but sometimes are a bit more crucial than others.

Harvest time, One of them.

It's been a challenging year for the Ag sector.

It usually is and the season this one could prove more challenging than usual.

At stake is a huge portion of the Arkansas economy.

Of course, State AG Secretary W Ward joins us now.

Mr. Secretary, thanks for coming aboard as always.

How does our harvest look right now?

How does the crop look?

Yeah, it's been as as you said it's been a challenging year, but but we were just about through on the row crop side of the row crop harvest and say I think the yields have been have been good, prices haven't been as great as what we would like, but people have been catching the weather breaks to where they needed to and been able to get in the field and and get the crops harvested.

So we're we're very close to being being done across the board on the row crop side of course Arkansas so very diverse agricultural state and so you have forestry, your livestock poultry and just this week we we had an incident of avian influenza.

So that certainly impacts the the poultry side but very diverse agriculture production we're we're just about through with harvest on the road crop side and so we're setting our producers up to be able to move forward past this year.

Yeah I want to check stay with row crops for just a second.

You mentioned prices, what's the margin this year as compared to previous years?

Yeah it's it's definitely tighter and that's you know farmers are used to dealing with that.

A lot of that has to do with the basis and the Mississippi River Levellers are low and so because it's been hot and dry and the river levels have been low.

So that that increases the the cost that a producer or where's the cost that they would receive when they're delivering delivering their crops and so top top margins but producers are are used to dealing with that and that's where the the higher yield has has been helpful.

We just wish the prices had been a little bit better and the basis and and the river levels have been higher.

Well, I wanted to stay with that too because transport was on my list of things to bring up.

It's been a matter of torment for the Ag sector, low river levels and we don't usually think about that but this year it was a significant factor, was it not?

It was, yeah.

And we we've seen this the last couple years with the Mississippi River levels being the way that they've been and I think that is you know just a shift and and and weather patterns.

And so you know it's been we've had a hot and dry period in Arkansas.

We had several counties that hit drought D3, severe drought conditions in Arkansas.

We had good rains this this week which is which will certainly be helpful and so hopefully we'll see those river levels start to increase.

But but to your point transportation is incredibly important not just for for agricultural commodities but but for everything that comes up and down the river.

Well, two, talking about fuel prices there, there has been great fluctuation in diesel particularly well all kinds of fossil fuels, petroleum distillates anyway over the last year really wide swings.

It has made very made planning very difficult for the Ag sector, not only for for farmers but for shippers every and fertilizer producers as well.

What impact is that had?

Yeah it's, it's, it's another piece of the uncertainty that producers deal with every year.

So you you've got the the changes from the River River levels, but but also just buying the inputs that they need, whether that's fertilizer or fuel.

So where they can, they're trying to lock in prices for next year if they can get a decent price.

But there's been so much fluctuation that that's been challenging and looking at some of the prospects especially for diesel aren't looking good.

So I know producers are already looking to next year and trying to lock in prices and buy in bulk wherever they can just to just to try to be prepared for next year.

But there's there's a lot of uncertainty.

Throw in the farm bill, you throw in all of those factors too that just create uncertainty.

There's always a lot of uncertainty, but this year there seems to be more than more than usual.

Well, here's some uncertainty.

Yes.

Well, and that's interest rates, which affect every sector of the economy.

AG, especially Federal Reserve, as you know, a couple of days ago decided to leave interest rates where they were, but it left open the door to a next month, or within the next couple of months anyway.

Another increase in interest rates.

You're already fighting inflation in the eggs, like every aspect of the economy is fighting inflation.

It's down a little bit, but still a significant factor.

How, how is that likely to affect us on the short term?

Yeah.

So it's it has an impact on whether someone's leasing their ground and how much their their rents are to lease that ground.

It has an impact on other loans that they're operating, loans that they're taking out.

Hopefully they can get low cost loans to to be able to put their crop in the ground the following year.

So it has an impact across the board people, people often take it for granted that the impact of interest rates.

But when you're when you've got a sizeable operation, you've got a lot of money going into that.

It takes every little bit of of those interest rates makes a difference on whether a farmer or producer is going to be profitable that year.

So it has an impact without a doubt.

What do you see as a near term impact anyway or is there a time in the in the next in the New Years just right around the corner to recover that's that's right.

Yeah.

So I think you know you know the University of Arkansas has done some studies and and our our net farm income is going to be down this year pretty sizeable amount.

So the one estimate was about a billion dollars lower this year which that's a big that's a big decrease in in one year.

But overall from 2015 to 2022 we're still above average.

So I I think we're sitting OK we're not where we would like to be.

Does it have a short, short term impact?

Absolutely.

We're down from last year.

You know those those swings and cycles happen but hopefully you know we're farmers are are are optimists and so we're always hoping that next year will be better.

Well here and we've got just a couple of minutes remaining Mr. Secretary I wanted to bring this up the and that is the the matter of foreign ownership particularly specifically Chinese ownership of of farmland Arkansas is involved there.

The attorney general has indicated he wants an even tougher rule.

What what says the Agriculture Department.

Yeah 100%.

As we we have been involved in this discussion from from day one both with Governor Sanders as well as her office and the governor's office and the Attorney General's office.

And Governor Sanders has been, I've been very supportive.

She understands what's at stake here and has has given us the tools to be successful and made the big announcement on October 17th about the 160 acres in Northeast Arkansas.

So she's she's taking a very firm position as well and when you, you know some people say it's just agriculture, what difference does it make.

But when you dig a little bit deeper and you see that Kim China who owns Syngenta is on the Department of Defense list as a Chinese military company doing business in the United States, it it causes people like, oh I didn't know that.

So we're we're we're definitely taking it very seriously and the governor with her leadership has helped us move forward with that.

Are you concerned how concerned are you Sir or are you concerned about retaliation You know it's it's possible we've we've heard that just wondering what what China might do.

They've they've had a few statements on on that.

Obviously they didn't like the decision.

But it's one to you like we, you know going back to the diversity of production in Arkansas and really across the United States, we've we've got the tools and resources to be successful and we can and we will be.

And so we don't need bad actors like China coming in and stealing our technology and not following rules of law and stealing the investments that that Americans and Arkansans have have poured into our agriculture industry and taking that away from us, just stealing it right under our nose.

So we're we're going to, we're going to be we're going to take a tough line on it.

And the governor sent a very clear message about how we'll respond to that sort of behavior.

You got to leave it there, Mr. Secretary, because we're out of time.

Thanks for joining us.

Thanks for pulling over to join us anyway, absolutely we'll be back with more in just a moment.

Back now with more on the Ag outlook.

There is always debate, often contentious on the Farm Bill, but in the end there is always a farm bill.

The debate is on what it contains, who it benefits and how much it costs.

So for an early assessment, we're joined now by Harrison Pittman of the University of Arkansas's agriculture division.

He is director of the National AG Law Center.

Thanks for coming in.

Doctor Pittman, as always, glad to be here.

Thank you.

Farm Bill is almost a misnomer.

It's as much, maybe more urban than it is rural.

It's a mix.

Particularly since the 1970s, there was a political alliance form between what we generally would call the nutrition community and what is traditionally thought of as the AG community.

Largest piece of the farm bill in terms of funding is devoted to the nutrition title, which is primarily Supplemental Nutrition Assistance.

That's true.

Good.

What's Arkansas looking for in the farm?

But we do.

This one's about to expire.

We need a new one.

Yeah.

So Arkansas would be looking for the things that it typically looks for some certainty.

You know, first of all, you have to think of when you write a farm bill.

And in this year, you're really not writing it for this year, you're thinking five or so years down the line, but in particular the the on in title one which is otherwise more commonly known as the farm safety net that your price and income support program that's very important to the row crop industry.

So that would be a top shelf issue for Arkansas and conservation programs and any changes that occur there, those would be top of the shelf.

And of course as we just alluded to nutrition programs are are key part of that some areas that a lot of people are watching and of course it depends on how the process moves forward and frankly whether the process moves forward in Congress particularly on the House side, you know what do you mean weather now?

OK as well.

So yeah, I'll explain that.

You know on the House side, you know we've gone through the last three or four weeks where we've gotten a new speaker after Kevin McCarthy, Speaker McCarthy, former Speaker McCarthy was was put in place in general uncertainty there.

And so as always there are issues that surround a a farm bill process and in recent cycles funding has always been top of that and that's a a core issue right now particularly on the House side.

So Chairman Thompson on the House side and Chairwoman Stabenow, Ranking Member, Senator Bozeman on the Senate AG Committee, those committees in both chambers have worked very different or very hard and their Staffs over the last several months to a year or more on on on discussing the farm bill, getting, you know, discussing where they where they want to go with it.

But of course it has to eventually get into the committee process and go to the floor.

And so to get to that point, we've got several appropriations bills that have to come through Congress.

We have, we have a looming government shutdown potentially November 17th.

So we have to say what's an appropriations bill?

Yes, I'm sorry, I'm with you.

But so we have some process, some basic process things to get through.

You know it.

Right now we're kind of hanging between, you know, the new Mike Johnson, the new Congressman from Louisiana, the new speaker of the House indicated right out of the chute that he thought they want to get a bill voted on in the House in December, which I guess is theoretically possible.

It's about very ambitious.

It would have been ambitious prior to the issues we had with with naming a new speaker in the House.

I think that if we can get a farm bill that looks like it's on the runway to completion in the first two months of 2024.

In that time period if people are kind of getting in the mood like OK, I think we're going to not any major hiccups then I think a new farm bill could be.

Sent to the president and signed.

It's a lot between the cup in the mouth to get to that point.

Yeah.

Looking at the long term, is there any really, is there any such thing as certainty in any farm bill depends on what you want to be certain about.

So it's certain that you're going to have some.

It's certain that the process in general has become more difficult.

The legislative process has consistently become more difficult and so the fact that most provisions of the Farm Bill expired October 1st of this year, that is not uncharted waters.

That's been the common practice in previous Farm Bill cycles is to get to a place where you know it'll be some period of months after that the Farm Bill is actually enacted.

It used to not be that way but but increasingly that's the way it's been and and they have gotten more difficult to pass And and I think that particularly with the the the margins in the house, you know just it could be either party.

But when one just has a four or five seat majority, these things can get a lot more difficult in, in in terms of you know the certainty of the AG say anything resembling certainty.

But the AG sector is captive not only to the farm though certainly but to other federal agencies said well and I'm thinking specifically of the EPA in terms of groundwater usage, pesticides, land use, whatever.

Oh man.

So that I mean a lot of dangling things there.

So in general if you start with the kind of a general overview, there's really not a a more regulated industry in the country than than agriculture.

There's nothing that goes on in AG that doesn't have a federal or a state law and or regulation and often times even an international component that goes with that.

Now with EPA that you know some of the major issues there you touched on pesticides and the Clean Water Act would be two major areas that have been ongoing issues but have spiked in recent weeks and months.

And I don't know how you, how much you want to unpack either one of those, but on the the Clean Water Act side, the United States Supreme Court issued a decision in June.

The short title is Sackett and it deals with what is the definitions of waters of the United States.

And that is the latest salvo.

And what's been an ongoing legal and regulatory battle since 1972 is because that defines what is the scope of federal jurisdiction on private lands in Arkansas and in other states for EPA as well as the Corps of Engineers and the current administration, the Biden administration issued a rule that was intended to replace the the Trump rule, which was intended to replace the Obama rule.

And and so that has multifaceted litigation.

Arkansas is a party to I think it's 22 states that filed a challenge to the Biden rule to a previous rule put it that way and and so currently Arkansas is actually under the pre 2015 wotis rule while others parts of the country are under a different rule.

We're really in the weeds now and then on the pesticide front that think that's probably the number one issue for the ag industry and basically this is an arena that has has a tremendous amount of litigation and regulation involved.

Do you see an end point?

Is there near term, not near term?

Right now there's a huge interaction between EPA and the US Fish and Wildlife Service under two different statutes.

One is the Endangered Species Act And in that world coming into the world of pesticide regulation under what another statute called FIFA or the Federal Insecticide Fungicide Rodenticide Act and that promises to change the landscape of of of pesticide use and regulation in the United States has already, has changed And it it's it's a significant, very significant area less than a minute remaining.

But I want to squeeze this in if I can and that's foreign ownership of farm Landing.

You're you've testified and you've studied this intensive extensively and testified on it.

What's wrong with that?

OK what's wrong with the foreign ownership?

Yeah, I mean well, I guess it depends on who you ask.

So just start with the numbers.

Arkansas basically tracks the overall National Statistics, meaning nationwide roughly 1/2 of foreign ownership is in the forestry sector and then roughly 1/4 is in row crop or cropland and a fourth is in pasture land.

A lot of that comes down to long term leases, which like solar and wind.

The issues that have played out in the country really related to primarily China, but also Russia, North Korea and Iran in seeking to prohibit foreign ownership of those in in either land or land near military installations.

I hate to end it there, but we have to.

It was simply out of time.

Sure.

Come back soon.

Absolutely.

Thank you.

And that does it for us for this week.

As always, we thank you for joining us and we'll see you next week support for Arkansas Week provided by the Arkansas Democrat Gazette, the Arkansas Times and Little Rock Public Radio.