Economic Repercussions and Resilience: South Dakota’s Farm Economy and Fiscal Landscape
On Wednesday, December 17, South Dakota’s State Economist Derek Johnson presented a comprehensive analysis of the state’s economic situation to the state Banking Commission. The heart of Johnson’s report focused on the significant impact the sluggish farm economy—primarily driven by plummeting prices in staple crops like soybeans, corn, and wheat—has had on South Dakota’s sales tax collections.
Johnson highlighted that sales tax collections directly tied to farm equipment experienced a steep decline of over 20% in the fiscal year 2025 compared to the previous year. Fiscal year 2026 has shown a continued downward trend, with a year-to-date decrease of approximately 16% in sales tax collections on agricultural machinery. This decline underscores the interconnection between the agricultural sector and the broader state economy. Johnson noted, “We know that in an ag-state like South Dakota, it bleeds into so many parts of the economy.”
However, a glimmer of optimism could be seen as the most recent month’s collections signaled the first year-over-year improvement in approximately two years. While this uptick offers some hope, the overall challenge remains acute in a state heavily reliant on agriculture.
Image 1 Caption: [Derek Johnson South Dakota]
Across state lines in Ryder, North Dakota, farmer Tyler Stafslien has faced a challenging season. On November 14, 2025, Stafslien showcased his soybean crop, which yielded only $8.65 per bushel at the market—falling below the profit margins needed to sustain successful farming operations. His situation echoes a wider narrative impacting Midwest farmers who struggle amid fluctuating market conditions.
The ramifications of these economic dynamics are thorough and pervasive. Governor Larry Rhoden, in his recent budget address on December 2, 2025, acknowledged a 0.6% decline in overall sales tax revenues for fiscal year 2025. This marked only the third such decline in 30 years—a testament to the unusual economic pressures influenced by the agricultural downturn. Rhoden outlined strategies to address these fiscal challenges without resorting to significant budget cuts, particularly in areas like education, which has seen funding remain flat.
In the current fiscal landscape, South Dakota has exhibited resilience in some sectors, with overall sales tax revenues for 2026 up by over 4% as of the latest estimates, ending on June 30. Johnson offered insights into these statistics, emphasizing that while the recovery is ongoing, the state remains vigilant in its economic analysis and response.
Image 3:
Larry Rhoden
Beyond agriculture, South Dakota’s economy displays formidable elements of strength. The state’s labor market, for example, remains buoyant with the nation’s lowest unemployment rate at 2%. In fact, there are approximately three job openings available for every unemployed individual, a phenomenon indicating a robust job market despite sectorial challenges.
Nevertheless, as South Dakota navigates these challenges, the housing market also requires keen examination. Compared to the pandemic-era boom, there has been a perceptible cooling in housing dynamics, affecting both potential homebuyers and investors who must adjust their expectations to new market realities.
In summary, South Dakota stands at a unique economic crossroads. The traditional stronghold of agriculture, while momentarily challenged, continues to be a pivotal player in the state’s economic narrative. Through strategic governance and responsive economic policies, South Dakota aims to weather this period of adversity and emerge stronger, with a diversified economic foundation to safeguard its future prosperity.