Finally, thanks to substantial increases in farm commodity prices, South Dakota’s chronically sluggish economy – we had negative GDP growth during all four quarters in 2022 – has reversed course and scored some substantial upside gains, coming in at an annualized rate of 10.1% during this year’s first quarter. That compares to a 2% rate for the nation overall.
The reason why is summarized by a notation in the Bureau of Economic Analysis report on the U.S. economy’s GDP growth for the first quarter of the year. Says BEA: “Agriculture, forestry, fishing, and hunting increased in 33 states and was the leading contributor to growth in states including North Dakota, Nebraska, South Dakota, Kansas, and Montana, the 5 states with the largest increases in real GDP.”
Followers of the ag commodity markets already know that soaring grain prices during the past couple of years have given farm states like South Dakota some economic support. Livestock played a significant role, too. Pasture-oriented states like South Dakota – we’re the eighth largest cattle producing state in the country – got a particular boost from the surge in cattle prices that began at the tail end of 2022 and gathered steam during the course of this year.
Also, there’s probably no question that this year’s 8.7% cost-of-living adjustment for Social Security recipients had something to do with 2023’s GDP boost. About 160,000 South Dakotans are aged 65 and older (representing 17.6% of our population compared to a national average of 16.8%). Considering that SS checks are averaging $140.00 a month more than last year, that’s a pretty substantial boost in spending money.
I’ve been chiding our Gov. Kristi Noem for the past year about her claim that South Dakota has the strongest economy in the nation, mainly because a year-long series of negative-GDP-growth quarters said otherwise. For once she’s getting a bit of support from the numbers, even though they’re mainly due, as the BEA notes, from an externality – global demand for farm products.
We can only hope that our state’s economy continues to get such support, but as we know only too well in this farm state, ag markets fluctuate.
For a steadier stream of economic support I think we can look to a newly installed — thanks to South Dakota voters — element of financial muscle-power: the expansion of Medicaid, which begins this year.
The Commonwealth Fund did an extensive study on the economic effects of medicaid expansion, one of its major conclusions being that “Medicaid expansion will fuel stronger state economies because of the inflow of federal funding.”
How much money will come into South Dakota to expand Medicaid? Slightly more than $500 million during FY 2024. For the first two years of expansion, the state’s share (10%) of funding it will also be mostly covered with federal funds via the American Rescue Plan Act.
That’s quite a bit of cash to be rolling over every year in a state with about 900,000 people.
With help from commodity traders around the world and our newest partner in the healthcare industry, the U.S. government, we might see an economic boomlet in this state and actually live up to Kristi Noem’s repeated boasts about the strength of our economy.
John Tsitrian is a businessman and writer from the Black Hills. He was a weekly columnist for the Rapid City Journal for 20 years. His articles and commentary have also appeared in The Los Angeles Times, The Denver Post and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a 13-month tour of duty as a radioman in Vietnam.
