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

Welcome to Arkansas week, I'm Chris Kane.

June's revenue numbers wrapped up the fiscal year with a surplus of $367.9 million, will be joined by the chief economists and state economic forecaster for the Arkansas Economic Development Institute to discuss that later in the program.

But first, farm bankruptcies are surging again, and Arkansas farmers are right in the thick of it.

The state now makes up more than a quarter of the nation's chapter 12 filings.

What's behind the rise and how might pending federal legislation shape the future of the ag sector, which is the state's top industry?

Well, joining us now to break it all down is Ryan Loyd, extension economist with the University of Arkansas System Division of Agriculture.

And Ryan, we appreciate you taking the time to join us.

Let's start with the big number here, which is 25%.

That's what Arkansas accounts for when it comes to chapter 12 filings nationwide so far in 2025.

What does that tell you about the financial health of our state's farms right now?

Absolutely.

So thank you so much for having me.

And when we're talking about chapter 12 bankruptcies, you know, we're talking about bankruptcy specific to family farms and farms in general.

And so when we were looking at that number, and you're looking at the share of what the eighth district, which Arkansas as a part of, as a portion of the nation, we're looking at just an uptick, compared to what we've seen the last few years.

And really, the numbers tell me that what we're looking at is, you know, folks who have been dealing with financial pressures, increasing input costs, declining commodity prices, you know, now is kind of the time that we're starting to see a lot of this, start to take its toll on the farmers.

And the farmers do everything that they're supposed to do in terms of marketing, and they do everything that they can do correctly.

But when you don't have prices that could cover your expenses at no matter the time of the year, it's difficult to keep up and maintain longevity in the business.

You mentioned the commodity prices dip.

Input costs not following that.

You know, we've talked a lot about input costs and how some costs like fuel and diesel, I mean, everything needs power and how those can put pressure on farm budgets.

What are you seeing producers start to explore to try and strategize ways to levelized those costs or other opportunities in that in that sector?

Well, you know, that's very farm specific in terms of what they can do and really depends on size.

Right.

And depends on so for example, you know, one way to make, you know, make inputs cheaper, you know, on the front end would be to pre-book them, you know, ahead of time you get a cheaper price, you buy bigger in bulk.

But not all farms have the, you know, that that ability to do so.

And so the farms that can, you know, they're doing what they can do on that front.

But the ones that can't, you know, they still have to pay that high, very high input cost and receive that same price for the commodities.

And so when we're looking at that, the main thing that can be done is marketing.

Right?

Diversification in terms of, you know, where you grow.

What are those downstream?

What are those?

And, you know, kind of products going to be where are they going to end up at?

Because right now we very much rely on the export market, which is has a lot of uncertainty surrounding it.

And it's a very difficult storm to get through when you don't know what's going to look like on the other side.

What about federal programs or incentives from different entities and agencies that can maybe support farmers during these tough times?

Absolutely.

So, you know, there is the FSA, the Farm Service Agency, and they can help in terms of, you know, getting cheaper loans, right.

And if you qualify for those, you can pay a, you know, a lower interest rate on your operating note or even an ownership, you know, a longer term note, which, which is very helpful to the farming community.

In addition to that, you know, if we're kind of referring to the new piece of legislation, the one big beautiful bill, you know, there's a 10 to 21% increase across the board in reference prices, which, you know, without getting into the crazy details of what that means, really, it's just kind of increasing that net that will catch farmers from falling all the way down to the ground.

And so they're increasing that net to help and support.

And also just kind of, you know, decreasing the premium subsidies on federal crop insurance or increasing the premium subsidies, excuse me, which would be cheaper to the farmer to get to protect those crops.

Which again, these these are all things that are kind of that are very new, from the one big, beautiful bill and, it's it's good to see and hopefully will help farmers, as they move forward through this.

Let's talk about some of the ripple effects in rural communities.

When struggles like this are happening, it trickles down.

What are some of the other things that maybe don't get talked about that are being affected by these bankruptcies?

Well, you know, on a personal level, right.

You know, these are people's family farms, right?

And these could be anywhere from, you know, 100 years plus to 20 years or even brand new.

Regardless, though, you know, this is people's livelihoods, right?

And, you know, most people live on the farm and this is what they know, and this is what they want to do, and they work hard at it.

And so when you think about ripple effects on a personal level, it's very difficult to to kind of get through this when, you know, let's say you have a family farm for 100 years, and now we have to get to this point, right.

The personal level it takes its toll and it takes its toll significantly on those rural communities, because if folks are making money in the rural community, the rural community won't have that kind of income coming through.

And when you think about it, we were looking there's been 60 plus farm auctions in the Delta this year.

And so, you know, there's kind of been people selling off equipment and selling it at a lower price and, you know, those sorts of things.

So when you really think about it, if the farmers struggle, those rural communities really struggle.

And then if the rural communities really struggle, you know, folks will try to leave and those rural communities won't be, you know, they won't have as many people as they did at one time.

And that's what you kind of see trade uncertainty and whether challenges to words or phrases you don't want to hear in the same sentence.

But they've been a consistent issue so far this year.

The question is, are these short term pains or these long term pains?

Based on some of the forecasts you're seeing, on the on the weather side, you know, this is going to be a long term pain.

You know, we've seen just, an increase in interest in adoption for crop insurance in the South.

And that's really mainly due to a lot of this unpredictable weather.

We've seen.

On the other hand, the trade, you know, uncertainties really of the short term, a long term problem and even a problem that has been going on for quite some time.

And when we look at that, you know, we had the first trade war in 2018.

And when you look at the numbers of bankruptcies at that time, when they started to uptick again, and when pandemic assistance came through, they declined.

And now what we've seen with this newer trade war that's starting up that we haven't seen harvest yet with this new trade war, but we've already seen that that reverse course uptick in those, bankruptcies.

And so when we're talking about trade, the uncertainty surrounding it is a really big deal.

And when we are reliant on the export market, if we don't have that anymore, that only puts more downward pressure on prices.

And the 2018 farm bill expired in 2023, was temporarily extended, the extension set to expire in September of this year.

What role does that uncertainty play in the current economic outlook for farmers, and what are you hearing about what could be in development right now, in terms of a new farm bill to extend it?

You know, one of the things we've heard in terms of the farm bill extending it or a new farm bill, I you feel like for the last few years we've kind of heard the same, you know, we're working on it or you know, it's coming or, you know, and I think that this was kind of including a lot of these farm safety net program changes and updates into the big beautiful bill was a way to kind of, okay, we need these are the most important things, and these are the things that need to be updated the most.

So we need to get that taken care of.

And when we're looking at, okay, the farm bill now expires in September, more than likely will be a continuing resolution.

Or just like how it's been, for the past few years.

And, you know, maybe a skinnier farm bill, you know, one that doesn't isn't all as all encompassing as a typical farm bill would be.

And so, you know, it's it's a lot of talk, and I don't know where we're going to stand on that, but it's good to see that at least something had been done to try to update some of these programs that were severely outdated.

Well, we appreciate you updating us and all of our viewers on everything happening in that sector.

Thank you again.

Ryan Loy from the University of Arkansas System Division of Agriculture.

Ryan, we'll see you next time.

Thank you so much.

Well, from agriculture to the overall economy, the state just closed the books on fiscal year 2025 with a surplus.

We'll tell you what's behind that stronger than expected finish and what it could mean moving forward in the fiscal year 2026 is we're joined now by Doctor Michael Pascoe, chief economist and state economic forecaster at the Arkansas Economic Development Institute.

Welcome back, Doctor Pascoe.

Great to see you again.

It's good to be here.

All right.

Let's start with in the state before we talk about national economic forecast.

So fiscal year 2025 we just mentioned the numbers for you.

Whenever you look at something like that, what is your reaction to seeing 367.9 million in the general revenue surplus?

Well, it's always a good thing to see a surplus rather than a deficit, that's for sure.

And in this case, it was actually higher than expected.

It turns out that not as many taxpayers as took advantage of the delayed tax deadline as the finance officials expected.

So, June came in, ahead of expectations in terms of, income taxes.

Now, if you look at the fiscal year overall, collections from income taxes were down, but that's largely due to the two tax cuts that took place that affected this fiscal year, as sales taxes were up, marginally, but only a little over 1% from year to year.

Which means basically consumers aren't even keeping pace with inflation when it comes to spending.

So, that's, slowed considerably since, we saw just a couple of years ago we were going through kind of a consumer spending boom.

But, you know, generally those are the kind of things I'd like to look at in the budget.

Budget?

Not necessarily, whether that how that positions the state in terms of their fiscal position, but, more about what it tells us about the underlying economy and what's on the minds of consumers and businesses.

Speaking of businesses, corporate income tax collections came in over 360% above forecasts.

Was that driven by businesses opting to not make those payments are not to delay their payments under the tax tax extension.

That may have been a big factor there.

There's a lot of volatility in corporate tax collections, when it comes to month to month kind of changes.

So, it's always difficult to attribute any specific factor to the corporate income tax.

So the surplus funds are now held in the state's general revenue allotment reserve fund.

Can you kind of walk us through how those reserve funds are used, what role they play in when it comes to budget planning?

Well, there are a number of different funds that, that they, keep some of those excess monies and, some of them are for the governor's, quick closing, abilities.

Some of them are just a rainy day fund.

And, that's valuable because if we should experience a downturn, a downturn in the economy and in revenues, then we have something to fall back on.

And that also helps with our bond ratings.

With the credit agencies look at our surpluses and our rainy day funds and say, well, okay, they're in a good position to survive.

If there is a if there's any dire circumstances.

So, that, lowers our credit risk.

I wonder if people out there maybe question what is a rainy day event look like where those funds could be used?

What are some examples of a rainy day?

Oh, well, you know, if we were to have another recession like the the Great Recession that we had, you know, over a decade ago, that was a situation where tax revenues fall considerably.

And, we need to fall back on, on the savings if they're available.

So, that would be a situation.

Now, we saw increases to both the Education Freedom account and corrections funding for fiscal year 2026.

How much flexibility does the state now have to shift priorities if revenue trends change, maybe in the next year, maybe in the next two years?

Well, I think the surpluses have built up some funding that, allow some flexibility.

You know, I don't know about, particular priorities.

That's, you know, what the legislature has to contend with.

But, you know, at this point, revenues are still healthy.

And, there doesn't appear to be any sort of strains on the current fiscal year budget.

Now, we're in 2026.

So things seem, fairly good going forward, with the exception of the general degree of uncertainty that's plaguing the economy at this point.

All right.

Let's talk about the national headlines now for just a moment.

June inflation report showed consumer price rose 2.7% from a year earlier.

What is that suggesting about the current state of inflation?

Where is it trending?

This was obviously a big political talking point over the last year and a half.

Well, yeah, we're not seeing inflation come down to the Fed's 2% target.

So, you know, that's a setback.

There are some analysts who are saying that we see signs of, tariff induced price increases in this latest report, particularly, when it comes to, fresh fruits and vegetables that, could not have been front loaded in the first quarter, but, really have to bear the burden of the tariffs now.

But it's really not very widespread at this point.

It takes some time for these things to work through the supply chains and through the economy.

We are certainly seeing the effects of tariffs on, federal revenue.

If you look at customs excise taxes, there are like, $67 billion in May, up considerably from, a year ago.

But, as far as, flowing through to consumer prices, there's still a ways to go on that.

Not that we're not expecting it to happen, but I think, retailers in particular are trying to avoid raising consumer prices and keep market share, but that can only last so long.

The Federal Reserve also in the news recently, there's been a lot of discussion about their interest rate strategy based on where the Fed's current rate is standing right now, what are some ripple effects that the state borrowing projects could be impacted here in Arkansas?

Well, the latest speculation is that the fed is unlikely to cut interest rates at all until the end of this year.

That's because calendar year, there are a couple of, governors who have talked about, the possibility of cutting rates sooner.

But, what's what's really on the policymakers minds right now is the fact that, there's uncertainty about the price outlook.

The tariffs are likely to at least temporarily increase inflation.

And so it doesn't have a good look to it to be cutting interest rates when inflation is rising and labor markets continue to be fairly strong.

We saw a downtick in national unemployment last month.

Unemployment is still, you know, around the 4% level, which is, still healthy.

And, so it it simply wouldn't be prudent from looking at the Fed's goals of, low inflation and high employment, to be cutting rates at this point.

That would be, kind of pushing the economy toward a more, more likely scenario of increasing inflation rather than disinflation, which is their their objective.

And also, ahead, August 1st expected more tariffs to be issued, China, Mexico, the EU, these have been pushed a few times.

We've talked on this show I think on previous deadlines before.

What are your anticipation on these tariff deadlines or these expected tariff deadlines?

Do you expect that one to follow through or be pushed again?

Well, we've seen some postponements all along the way.

We had April and July.

Now August.

And you know, the financial markets seem to be kind of shrugging it off at this point, taking, well, let's wait and see when this actually does happen.

And I think, there will be a reaction if push comes to shove and all the tariffs that have been proposed are actually implemented.

You know, when you look around at the different forecast that, economists are coming out with an important assumption is, whether they're, considering those tariffs to be something that's going to happen and therefore and then be permanent after that, or whether it's something that, well, will be there'll be some compromise.

We'll see higher steel and aluminum and copper tariffs.

But all those, retaliatory tariffs are likely never going to take place.

You know, at the same time, if you look at the situations where we're negotiating, a new trade deals, in every case, we end up with higher tariff rates, on both sides than we started with.

So there's this kind of creeping tariff increases that are happening even if the August deadline comes and goes and we don't see another round of, dramatic increases, those tariff rates are higher now than they, have been in many years.

And if we see the entire panoply, implemented, we're looking at about a 20% effective tariff rate in the US.

And, that's a level that we haven't seen in over a century.

So, it's kind of hard to speculate because we really don't have a whole lot of, contemporary or modern experience to go on and how how dramatic that would affect the economy.

We appreciate your time.

And thanks for breaking it all down for us.

Chief economist at the Arkansas Economic Development Institute, Doctor Michael Pascoe, great to see you again.

And we'll see you next time.

Thank you.

All right.

We'll be right back after this.

Welcome back.

With major expectations for the extraction of lithium in South Arkansas, a first of its kind technology accelerator has launched lithium is the key ingredient needed for things like electric car batteries that are growing in demand.

And the venture center held a kickoff event on Monday in El Dorado.

Its executive director, Arthur or Dunja, joins us now to tell us a little bit more about that event.

And thank you so much for joining us, Arthur.

I know so, so many big things are happening with you all at the venture center.

But when you talk about big things happening in Arkansas, it's no question why this is a great pairing to have the lithium event and program starting with you all to venture center.

Absolutely.

And thank you very much, Chris, for having us, myself and my teammates virtually, on the show and for helping us to really promote what we think, to your point, is extremely important.

And just part of the support effort that's going on to try to help build a lithium economy, here in the state and building that economy.

There is multiple layers to that.

Right?

It is been a process.

Of course, we just recently heard about the settlement on the mineral rights in South Arkansas, which is kind of helped propel the industry even more.

But there seems to be more and more interest.

What is really captivating, I think Arkansans and business leaders around the state with this technology, well, I think it's the economic promise, of what, a true lithium economy that's initially built on the, the potential of the smack over formation.

But hopefully, with initiatives such as the Arkansas Lithium Technology Accelerator, which I hope you don't mind, I'll call it Alta, because the acronym is A is A is a lot better.

Is just one of many initiatives, that will try to help build that economy.

And Alta, which you're absolutely right.

We kicked off an El Dorado, this week.

And it was conceived first in the hallways of the of the first Arkansas.

Lithium Innovation Summit last year, that the governor and secretary, McDonald, drove, which was packed.

It was packed.

We were we helped we were one of many that helped, put that together.

We were hoping to get maybe 100, 150 folks.

And when we we passed 800, we said, I think we have something here, but we were sitting there in the hall or standing there in the hallway with Jesse Edmondson, of Standard Lithium and Eric Pollack of the University of Arkansas, Fayetteville.

And essentially we came up with the idea of why don't we leverage the playbook that we've been doing successfully at the venture center with industrial partners for fintech, for the state.

Why don't we leverage that for lithium?

And so with their partnership and specifically with their insights and their knowledge, we curated, some of the best and brightest technology solution companies from around the world put them, some of them into the first cohort, all with an eye towards, quite frankly, getting them to plant their flag in Arkansas as a result of the of the accelerator.

How does the program work and what kind of companies are you are you partnering with in this great question?

Again, it really begins with the actual industry leaders in fintech.

It was companies like office or the Arkansas Bankers Association, which were still partnered with in lithium.

It begins with companies like Standard Lithium.

And we've had great input from tetra, from Lanxess, from Albemarle.

Good, good initial discussions with, with ExxonMobil as well as with Chevron.

We work with them to identify their immediate problems and opportunities.

And with their help, we identify these global companies and we bring them in.

Essentially, these companies have been selected the first three because they provide innovative leap frogging solutions at different points of the lithium ion battery supply chain.

So our first company, Telescope Innovations, is an immediate platform that has innovative solutions to optimize the the the refinement and extraction of lithium from the brine.

In the process.

So that's the very top, the very beginning, the supply chain then, and they're from Canada, and we want them to put their U.S headquarters here.

And then further down the chain there's a company that we've selected called Nano One again, Canadian based.

And what they have is an incredibly innovative solution to create cathode materials based on lithium that are necessary for lithium ion batteries.

And what's critical about that is the majority of cathode.

In fact, the vast majority of cathode production is actually done in China.

And so what nano one allows us to do as a country is to take an innovative leap over what's currently being done and create cathode material much more economically efficient.

And, environmentally least impactful, which is also important.

The final company, which actually has Arkansas roots is Ram Geothermal.

And you'd be wondering why a geothermal company and all of this lithium stuff.

Well, when you extract brine, it's coming up really hot.

And so as it comes from literally the wellhead through the pipes and through the extraction process, whether it's bromide or lithium, there's a lot of heat waste that is given off.

Ramji thermal has an innovative geothermal solution that can capture that heat waste during the drilling and refinement process, create energy and electricity that can actually offset the power needs of that lithium plant.

So think about in the near future, energy self-sufficient and economically and environmentally impactful plants that way.

So so these first three companies we were we selected them because they actually are important at different parts of the chain.

And that's the philosophy that we are using and the design principles for the future cohorts as well.

We have to innovate in order to achieve energy independence in this country.

I know you've had great support from state leadership throughout this process.

This would not be possible without the support of of Hugh McDonald, Commerce Secretary Colin O'Neill at ADC, Esperanza, Bob, Laura, all the folks at ADC who've been incredibly instrumental in our previous accelerators, they showed for us down in El Dorado.

And they've been nothing but amazing.

The local state, representatives and and senators have been nothing but amazing and even more, equally important, the county judges, the municipal leaders, whether it's the chambers of commerce in Union County, Columbia in Washington, in Lafayette, and the mayors, El Dorado, Magnolia, Lewisville have been fantastic.

We talk about the formation, the smack over formation.

It seems like a formation of state leaders as well, where they're all coming together because they realize the potential, like you all do, as well.

A remind everybody about the venture center, as we've got a minute left here.

Absolutely.

The venture center, we are a nonprofit entrepreneur support organization, over a decade old.

We support the success and help accelerate the success of startup founders existing small business owners and corporate innovators like Jesse Edmondson and Standard Lithium.

With our programs and partnerships with a vision of helping to raise Arkansas to global levels of entrepreneurial success, I would be remiss if I didn't want to invite our folks to come to our demo day, which is the wrap up of Alta.

That's going to be July 31st, which is a Thursday in Bentonville at The Record, and come to our website, sign up.

It's free, and you get to meet the three companies.

They will do their mini Ted talks and actually show you why we think they're the most innovative technology leaders in this industry.

Thank you so much for joining us, Arthur Dounia, the Executive Director of the Venture Center.

We appreciate your time.

We'll see you next time.

Thank you.

Appreciate you as well.

That is all the time we have here on Arkansas Week.

Thank you for joining us.

We'll see you next time.

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