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T A X CHANGES IMPAC TING BUSINESSES IN 2017 As 2017 arrives, so do new tax planning opportunities for businesses. Here is a look at some of the more important ones. Affordable Care Act For small businesses, the “21st Century Cures Act” finally enables them to pass along pre-tax dollars to employees for medical expenses through a Health Reimbursement Arrangement, or HRA. Prior to this law, stand-alone HRAs went against the market reforms created by the Affordable Care Act. These new HRAs are called Qualified Small Employer HRAs (QSEHRAs). Although not all inclusive, businesses need to keep in mind these important points when establishing a QSEHRA: • Employers must have less than 50 full-time equivalent employees. • It is effective for plan years beginning after Dec. 31, 2016. • It must be solely funded by employer dollars. • No discrimination is allowed. • The maximum reimbursement is $4,950 for single employees and $10,000 for employees with family plans. This amount is prorated if less than 12 months. • Employers cannot offer a group plan. • There is aW-2 reporting requirement starting in 2017. • No double benefit is allowed, meaning an employee will need to consider it when applying for an Advanced Premium Tax Credit. • It is not considered group health insurance.

Due Date Changes Also, new in 2017 are some important filing deadlines that are quite different than in the past. Forms W-2 and 1099-MISC will need to be sent to the recipients and to the IRS by January 31. Corporations that have a December 31 year-end will now have an April 15 due date (instead of March 15) and partnerships with a December 31 year-end will now have a March 15 due date (instead of April 15). Section 179 Deduction Small businesses will see a slight increase this year in the Section 179 deduction, which allows businesses to deduct the purchase price of certain equipment and software. Businesses may expense up to $510,000 of new equipment as long as they do not exceed $2.3 million of equipment purchases. This will be the last year to benefit from 50 percent bonus depreciation. In 2018, it falls to 40 percent and then in 2019, it drops again to 30 percent. Work Opportunity Tax Credit One often overlooked credit, the Work Opportunity Tax Credit, is still in place this year. This credit provides dollars back to employers who hire employees within specific target groups and can be quite substantial, in some cases up to $9,600 per qualified employee. However, there is a short time frame to complete the needed documentation for this credit.

By: Tonya Rule, CPA Tonya Rule has been providing tax and consulting services to business and individuals for more than 16 years. She is a leader of Eide Bailly’s health care reform team and regularly writes and presents on the Affordable Care Act and other tax issues. Contact at 507.386.6239 or trule@eidebailly.com


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1031 ‘Like Kind’ Exchange FAQs By Kaitlin Pals, Gislason & Hunter LLP

Q. What’s so great about 1031 exchanges? A 1031 exchange allows you to trade business or investment property tax efficiently. Instead of selling property, paying tax on the gain, and then buying replacement property, a 1031 exchange allows you to trade the old property for a new one without recognizing gain. Instead, your tax basis in the old property transfers over to the new property, so you defer the tax until you sell the new property.

Q. How do you know if the property you want to exchange is “like kind”? The “like kind” rules for real estate are very broad. Real estate located in the U.S. – agricultural or commercial, bare ground or improved- is all like kind. Even perpetual easements and long-term leases can be like kind with fee title to real estate.

Q. Great! So I can exchange my real estate for any other real estate, right? It’s not that simple. While all real property is “like kind,” it’s important to make sure an exchange won’t trigger depreciation recaptureessentially, “paying back” the depreciation deductions you’ve taken on the property. The cardinal rule is to avoid replacing depreciated real estate (buildings) with nondepreciable real estate (land). Farmers have an added hurdle to 1031 exchanges, because many agricultural buildings are subject to special depreciation rules, which can create depreciation recapture if exchanged for other kinds of commercial buildings.

Q. How long do I have to find the property I want to obtain in the exchange? In a normal, forward exchange, you must identify the property or properties you want to obtain within 45 days of closing the sale of your property. Identifying property does not commit you to purchasing it, and you can identify more properties than you intend to buy (within certain limits) in case your first choice falls through

MN Valley Business • February 2017 • 1


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F E A T U R E S Februar y 2017 • Volume 9, Issue 5

10

Reducing the statewide business property tax is at the top of the list of reforms for most every business owner and business association in Minnesota.

14

Tricia Frederick – co-owner of Inner Vitality – started the business in Mankato after traveling to the Twin Cities and finding success using floatation therapy herself.

16

Carol Herden started sculpting as a child on her family’s Montana ranch. Today she is a renowned sculptor of livestock and works out of her store and studio in Amboy.

18

Rick Brockberg recently opened Brock’s Discount Store on North Riverfront Drive in Mankato, selling a wide variety of returns at discounted prices.

MN Valley Business • February 2017 • 3


February 2017 • VOLUME 9, ISSUE 5 PUBLISHER Steve Jameson EXECUTIVE EDITOR Joe Spear ASSOCIATE EDITOR Tim Krohn CONTRIBUTING Tim Krohn WRITERS Kent Thiesse Heidi Sampson Dan Greenwood Tim Penny PHOTOGRAPHERS Pat Christman Jackson Forderer COVER PHOTO Pat Christman PAGE DESIGNER Christina Sankey ADVERTISING Phil Seibel MANAGER ADVERTISING Jordan Greer Sales Josh Zimmerman Marianne Carlson Theresa Haefner Thomas Frank ADVERTISING Barb Wass ASSISTANT ADVERTISING Sue Hammar DESIGNERS Christina Sankey CIRCULATION Justin Niles DIRECTOR For editorial inquiries, call Tim Krohn at 507-344-6383. For advertising, call 344-6336, or e-mail mankatomag@mankatofreepress.com. MN Valley Business is published by The Free Press Media monthly at 418 South 2nd Street Mankato MN 56001.

■ Local Business memos/ Company news.....................................5 ■ Business Commentary.........................8 ■ Business and Industry trends..........20 ■ Retail trends.....................................21 ■ Construction, real estate trends.....22 ■ Gas trends........................................23 ■ Stocks...............................................23 ■ Agriculture Outlook..........................24 ■ Agribusiness trends..........................25 ■ Minnesota Business updates............26 ■ Job trends.........................................26 ■ Greater Mankato Growth..................28 ■ Greater Mankato Growth Member Activities ...........................30

From the editor

By Joe Spear

Business cycle rears its head. Ugly, but often necessary We were reminded of the risks of retail recently when Sears announced the closing of its River Hills Mall store after a relatively short 20-year run. That’s short in comparison to the run of most national chains, but many saw this coming for the giant retailer that got its start with a Minnesota guy named Richard Sears who in 1886 began by selling watches as the station agent in Redwood Falls. Sears in Mankato started downtown on the city’s storied Front Street shopping district in 1939 and moved to Madison East Center in 1968 when indoor malls became all the rage. It was big news when the store pulled out of Madison East and moved to the new River Hills Mall five years after it opened. A combination of factors such as lack of profits, burdensome debt and an ownership takeover by a financier appears to be leading to the chain’s demise. Though Sears closed 42 stores in the recent announcement, its Kmart investment has similarly tanked, with no one willing to buy the chain even if it were a “blue light special.” Times have changed, and so have consumers. The retail environment has been disrupted by changes in financing, takeover by people who have no experience in the business and of course, online shopping. The younger generation doesn’t seem enamored with an old concept called “window shopping.” Some have argued this transformation may lead to the demise of the concept of the shopping mall itself. Will big retail chains that have always been a traffic draw for malls fall and create a domino effect with all the other retailers and the mall itself? Doubtful. And if so, not anytime soon. Change can happen slowly

4 • February 2017 • MN Valley Business

and it can reverse itself, though it’s difficult to think of one American business that went back to being what it used to be and has been successful as a result. Of course, plenty of businesses fail. Some in the first year, some after 30 years. St. Peter’s Whiskey River restaurant announced its closing after more than 35 years in business about a week after the Sears announcement. The news business has undergone some of the most fundamental change of any business with the advent of the internet and online and “free” news, which we now know is also sometimes “free” and “fake.” The news business model has been transformed almost more fundamentally than big businesses like Sears. At Free Press Media the disruption has not been easy, but it’s fair to say we’re adapting in reasonable ways. The revenue model has gone away from funding our operations mostly with advertising revenue to it being more of an even split between advertising revenue and “membership” or subscription fees from readers. Still, big and bureaucratic is not necessarily a reason for business failure. I’ve worked for big corporations that had centralized decision-making and big corporations that have had decentralized decision making. The de-centralized works better. It puts the people who produce the product closer to those who buy it. My daily contact with readers helps our staff produce a better news product both online and in print. But that is not to say there is not value in being owned by a larger corporate entity. Corporations have buying power a small operation would not have. They can buy everything from newsprint to online news software and infrastructure cheaper and in


bulk. Bricks and mortar stores needed big corporations to finance real estate, and online shopping does not. There have been some colossal failures in our business. One news company toyed with the idea of standard pages of national news for all of its news operations whether they were in Omaha or Boston. It saved on production cost of those two or three pages for all the papers that published them. But it was a failure because people like different national news depending on where they live. Omaha needs more farm and agriculture news while Boston needs more news about commercial fishing. The key for any business is to take advantage of a corporation’s resources while keeping the local product relevant to the local audience. It sounds simple, but as we see, preferences and lifestyles change, and those who do not change with it, and change quickly, do so at their peril. Joe Spear is executive editor of Minnesota Valley Business. Contact him at jspear@mankatofreepress.com or 344-6382. Follow on Twitter @jfspear.

Local Business People/Company News

Accounting firms merge

The accounting firms of Morken, Eckberg & Co. in Mankato, and Steiner Financial, with offices in Hutchinson and Winthrop, have merged. New owners and partners Joel Eckberg, and Glen Steiner have purchased the Morken firm from long-time owners Chuck and Janet Morken, who will continue working with the firm as employees after the merger. Operating under the new name, Morken Eckberg Steiner LLC, the firm provides tax and accounting services to individuals and small business in all three locations. ■■■

Femrite joins Coldwell

April Femrite has joined Coldwell Banker Commercial Fisher Group as a licensed

business broker. The office is located at 1961 Premier Drive, Suite 404. She will represent clients during the process of selling or buying a privately held business. Her services include providing a broker’s opinion of business value, marketing of the business, screening of potential buyers, facilitating negotiations and due diligence investigation and coordinating all aspects of the business sale. ■■■

SouthPoint credit union open

SouthPoint Financial Credit Union opened their fifth location at 1800 Commerce Drive in North Mankato. New to Greater Mankato, SouthPoint has a full line of personal and business deposit,

MN Valley Business • February 2017 • 5


lending and wealth management services, a drive-through lane open Monday through Friday and Saturday mornings and a 24/7 drive-up ATM. “Our management team and staff are looking for ward to welcoming individuals, families and businesses from the greater Mankato/North Mankato area,” Dick Nesvold, CEO and president said in a statement. SouthPoint also is in Sleepy Eye, Springfield, New Ulm and St. Peter. ■■■

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Kato buys Willard & Williams

Willard and Williams Insurance Agency, which started in Mankato in 1901, has been purchased by Kato Insurance Agency. Bob Richter, President of Willard and Williams Insurance Agency, said he feels that he has made the best choice for his customers and staff going forward. “It was important to me that the business stayed locally owned if possible,” he said in a press release. “Kato Insurance has always been a well-respected business in the area, and we have always been friendly competitors. After about a year of discussion, I felt they would be the perfect fit for our employees and longtime customers.” Willard and Williams has provided property and casualty, surety, life and health insurance to families and businesses throughout the region, and is one of the longest running businesses in Mankato. Kato Insurance began in Mankato in 1983 and has policyholders in 12 states. Its president is Scott Michaletz. Richter and the agency’s three employees will remain with the company, operating under the Kato Insurance name. Operations will continue in their current location until the Kato Insurance office expansion project is complete, which will bring the Kato Insurance team to 15. ■■■

New Ulm’s Beacon acquired

Massachusetts-based Hub Pen


Company, one of the largest suppliers of promotional writing instruments in the U.S., has acquired New Ulm Minnesotabased supplier Beacon Promotions. The move is aimed at helping both companies better serve the market with a broader portfolio. The suppliers will maintain their individual brands and current leadership and facilities, and customers should not notice any changes. The president of Beacon is Gary Haley.

field level. Aglytix provides data on stand establishment, germination, weed density, crop health, field consistency zones and residue variability. Other Growers using the Aglytix platform have reported increases in yields of up to 25 percent and reductions of more than 15 percent in unnecessary costs. Jerry Johnson is the founder and CEO at Aglytix

■■■

Computer Technology Solutions, southern Minnesota’s only Apple authorized service provider, announce new technical certifications. Beaux Bonney, Aaron Hartwell and Xac Dinsmore have earned their ACMT (Apple Certified Mac Technician) status. In addition, Bonney and Dinsmore were certified as ACiT (Apple Certified IOS Technicians).

Greenstone joins Aglytix

Agricultural company Greenstone has joined forces with Aglytix, a Mankato-based software company, to deliver optimization ser vices to its customers. The relationship provides Greenstone’s customers with additional analytical services to their growers enabling them to reduce inefficiencies, increase yields and improve profitability by taking practical actions at the

■■■

CTS staff certified

Pals promoted to partner

Gislason & Hunter LLP announced Kaitlin Pals from the New Ulm office has been named Partner. Pals’ practice focuses on assisting clients with tax and Kaitlin Pals estate planning and business succession planning for individuals, families and family owned businesses in industry with a special emphasis in agriculture. In addition to estate planning, Pals works with corporate law issues and real estate as well as family law issues regarding adoption. Pals received her Juris Doctor of Law in 2011 from the University of Iowa College of Law.

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Business Commentary

By Tim Penny

Remember the Floods? L

expenses until ast week Viet “Henry” Long insurance money could stopped into come through. Since Southern Minnesota then, the Disaster Initiative Foundation’s Recovery Fund model (SMIF) office. He was has been replicated in confused about a of our region and across couple checks he had the state to respond to received from the everything from Foundation. They were tornadoes to fires. not big checks, totaling As ever in only $2,500, but both emergencies like these, were indeed for Henry, my friend and who co-owns Magic Ten colleague John Monson Nails in Owatonna. of AgStar is always the Henry took over first call I get. “Tim, ownership after the 2010 what can we do to floods, when the help?” AgStar put in the previous owner decided first funds after the the clean-up was more 2007 floods, and again than she wanted to after this February’s undertake. When the main street fire in 2016 floods came in Madelia. They also September, Magic Ten provided a large Nails, located right portion of the funds for across from the Straight the recent flood River in Owatonna, was recovery efforts. again underwater. In every instance, For those of us who those AgStar donations did not suffer water have helped leverage damage during those other donations to our torrential rains, Disaster Recovery September already Fund. In 2007, $850,000 seems so long ago. But, was raised and that is not true for those distributed to more homes and businesses than 110 affected that experienced Viet “Henry” Long, Owner of Magic Ten Nails in Owatonna, received a SMIF businesses in flooding. southeastern Disaster Recovery Fund grant “It was going to take Minnesota. For the fast response to the 2016 floods Madelia fire, approximately two to three months for the in our region. SMIF’s Business $240,000 came through the fund insurance money to come Disaster Recovery Grants are (with $100,000 donated by through,” said Long. “We based on studies that show that Downs Food Group). couldn’t wait that long to get early money is crucial to help back in business - as a small The grants SMIF gives are not businesses decide to re-open. large and certainly do not cover business, we needed to keep When I first started at the all losses. But when faced with a working to keep making money. Foundation in 2007, one of my disaster, the Foundation’s main I had taken out a loan for initial first duties was to figure out what priority is to encourage our repairs, and was grateful to SMIF’s response should be to region’s small businesses to rereceive SMIF’s funds so quickly the 2007 floods in southeastern open. These business owners to help buy new furniture and Minnesota. We set up a Disaster need to know they are valued equipment.” Recovery Fund program to and surrounded by a support The grant to Long and 16 other provide small grants to network. business owners was a small but businesses to help with initial 8 • February 2017 • MN Valley Business


In addition to Henry Long’s visit, last week the Foundation also received a note of thanks from a local child care provider, Connie Scott. “The flood that damaged my child care business came when I was still struggling to get up and running,” said Scott. “I debated whether to repair the damage and start over, or close the doors. I am pleased with the looks of my updated and renewed daycare and look forward to moving ahead. [SMIF’s] support made a big difference!” When I stopped by Scott’s child care last week, it was hard to imagine what it looked like with three feet of water. People like Connie, Henry and many others have demonstrated a high degree of resiliency. In a town of 1,700 like Rushford, or 2,300 like Madelia or 9,300 like flooded Waseca, the loss of even one or two businesses is huge. That is why we are proud of the small but important role served by our Foundation’s Disaster Recovery Fund. For example, in Rushford alone, where roughly 70 businesses were flooded back in 2007, 83 percent of the businesses that reopened after the floods are still doing business today. SMIF’s disaster recovery dollars helped make that possible. 2016 was a difficult year for main street businesses in Madelia and for businesses affected by the September rains. Here is hoping that 2017 is a prosperous year for these small business owners and for the region as a whole. As always, I welcome your comments and questions. You can reach me at timp@smifoundation.org or 507-455-3215.

2016 was a difficult year for main street businesses in Madelia and for businesses affected by the September rains.

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Tim Penny is president and CEO of SMIF. timp@smifoundation.org or 507-455-3215.

MN Valley Business • February 2017 • 9 4.95”x4.95”

MN Valley Business December 2016


Jones Metal just installed this new metal press at its Mankato facility.

Taxing topic Businesses look for tax relief By Tim Krohn | Photos by Pat Christman

D

avid Richards, co-owner of Jones Metal in Mankato, knows the need for taxes but doesn’t understand the complexity. “I’m certainly not against paying my share of taxes. It’s the responsibility we all bear, we all drive down the roads and use all the services we take for granted every day,” he said. “But there’s so much over-regulation and our tax code is ridiculously complicated. If you’re going to tell me I’m going to pay this tax, why give me 15 pages of loopholes not to pay it. And it gets worse every year.” As business owns and managers round up the last records their accountants need to file taxes, policymakers and business groups are looking at ways to reduce and or simplify some of the taxes they see as most onerous. The Minnesota Chamber always has taxes at or near

the top of their priority list. “We’re really focused on those taxes that are a roadblock to investment and entrepreneurship and the ones that are non-competitive,” said Beth Strinden Kadoun, senior vice president of tax and fiscal policy for the chamber. Greater Mankato Growth surveys its members to learn what issues are important and they work with the Minnesota Chamber of Commerce on many legislative priorities. Patrick Baker, director of government and institutional affairs at GMG, said that while certain tax policy is of concern to businesses, most businesses looking to open or expand here have higher priorities. “There are plenty of business owners who think taxes are too high, there’s plenty who think they’re reasonable for the value they get. When we deal with

Cover Story

10 • February 2017 • MN Valley Business


Patrick Baker new business prospects one of the last things they bring up is absolute tax rates,” Baker said. What they first bring up is whether there is enough workforce talent, if the infrastructure is strong, if the water supply is adequate. “Talent is top of the list now and there’s an argument that top talent doesn’t come cheap. That you need great K-12 education and higher ed systems. There’s always that push and pull,” he said. “But there’s that sense we could do a few things that would make the tax environment better. Minnesota isn’t going to ever the cheapest but we don’t want to be in the top 5 on everything.”

A high tax state

Different organizations rank Minnesota slightly differently when looking at business taxes or overall tax burdens. But all of the groups that do such rankings put Minnesota among the highest taxed in the country. The Tax Foundation recently came out with their 2017 Business Tax Climate Index, which ranked Minnesota among the five worst in the country. The foundation ranked Minnesota 46 overall, with a corporate tax rate that ranked 43 and a personal income tax rank of 45. Minnesota ranked better in the sales tax and unemployment insurance tax categories – 25 and 28 respectively.

The state’s ranking has been about the same for the last several years. The foundation is a think tank founded in 1937 that lists the goals of sound tax policy being: simplicity, transparency, neutrality, stability, no retroactivity, broad bases and low rates. Wallethub.com ranks all states based on their overall tax burdens and ranked Minnesota as sixth highest in the country.

Property tax targeted

Talk to virtually any business owner or industry group and there is one tax they point to first as in need of change. The statewide property tax The tax was enacted during the Jesse Ventura administration’s 2001 tax reform. The tax is paid only by business property and cabin owners. The money was initially intended for education, but the tax revenue - $850 million last year - goes into the state’s general budget fund. The amount tax automatically increases with inflation each year. Baker said the state tax is a big chunk of businesses’ property tax bill. “For most businesses, a third of their property taxes goes to the statewide property tax. It’s a significant amount.”

He said the worst trait of the tax is the automatic inflator. “It ratchets the tax up every year whether the state’s in good economic times or bad economic times. “The top priority of the state chamber and us is to first get rid of that automatic inflator,” Baker said. Richards said he’d like to see the state property tax tweaked but knows tax changes always affect someone. “I think there could be a little relief from it, but don’t rob Peter to pay Paul by taking it from someone else. That’s always the tough part.” Kadoun said that because the money goes into the state’s general fund, any reduction in the statewide property tax wouldn’t be taking money from local coffers. Baker said only a handful of states have a similar tax. “It’s such an outlier compared to the rest of the country.” He said that besides ending the automatic increase in the tax, business groups hope to get an exemption up to a certain amount of property value. “Maybe the first $150,000 would be exempt from the statewide property tax. If you have a $60 million facility it’s a drop in the bucket. But if you’re a Main Street business

MN Valley Business • February 2017 • 11


AMONG HIGHEST IN NATION Business property taxes are over 90% above national average on some type of properties and over 200% higher than some neighboring states. MN Ranking

Market Value

Property Tax

% above nat’l avg.

7th highest 2nd 2nd 6th 7th

$100,000 $1 million $25 million $1 million $25 million

$3,099 $39,356 $1,019,307 $39,356 $1,019,307

+52% +88% +93% +54% +58%

Metro Commercial

15th 6th 6th

Metro Industrial

11th 12th

$100,000 $1 million $25 million $1 million $25 million

$3,275 $41,404 $1,071,696 $41,401 $1,071,696

+30% +60% +63% +31% +34%

Rural Commercial Rural Industrial

Chart Courtesy of United for Jobs Minnesota

that’s a serious tax break,” Baker said. “There was a $2 billion tax increase a couple of sessions ago and now the state has pretty significant surpluses and there needs to be a certain correction of tax policy.” Kadoun said there was bipartisan support to reduce the tax last year and it was in the tax bill that passed the Legislature but was vetoed because of faulty language included in another part of the tax bill. That reduction, however, left the inflation adjuster in place. “What they had last year was a good start but we really want that inflator removed so it doesn’t just keep going up and up,” Kadoun said.

Top tier tax trap

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Another big issue for many businesses is a new fourth tier in the personal income tax rate that is causing many business owners to pay more taxes on business profits. “There’s no expectation the new fourth tier will disappear, but it targeted, unintentionally, a bunch of small businesses that file taxes as an S Corp,” Baker said. Richards says Jones Metal is an S Corp and so the business taxes are paid for by the individual owners. “So our tax return might say I had an income of, say $50,000, but I only got paid $10,000 and the other $40,000 is staying in the business for operating money but I get taxed on that whole $50,000,” Richards said. “It’d be nice to be taxed on your actual income as opposed to what’s perceived. But I understand that we chose to be an S Corp. With a C Corp there’s tax on dividends and your income. Ten years ago we switched to an S Corp. It made sense to convert then but today the tax is about the same.” Baker said business groups and some lawmakers are looking at ways to let owners keep that business income out of the high tier of taxes. “There’s an argument to have the richest of the rich pay their fair share, but this caught a lot of


Beth Kadoun small business owners as well,” Bakers said of the new highest tax rate. Richards said he is neutral about the amount of taxes the state and local governments levy from businesses and individuals. “I’d rather see reform and see the tax system be straightforward and to have the money go where it was supposed to go. “We should see how much we need for revenue and then tax straightforward and make it fair.”

Other issues

Kadoun said the chamber has other issues it’s working on in the Legislature. She said the state has had a strong amount of research thanks in part to a research and development tax credit passed in 1981. “We were first to do it. Now other states have passed us, so we want to expand it and simplify it.” She said Minnesota is also becoming an outlier with the estate tax. “Most states don’t have one. We’re one of 13 who have it.” She said that in most states the estate tax doesn’t kick in until after the first $5 million of value while Minnesota is at $2 million. “It makes it much harder for small businesses and farmers to pass on that business.” MV

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MN Valley Business • February 2017 • 13


Tricia Frederick and Scott Peterson, co-owners.

Floating for relief Inner Vitality open in Mankato

By Heidi Sampson Photos by Pat Christman

I

magine, being in a low-gravity, totally silent, and pitch-black floatation pod for a full hour, to give the body time to truly relax. Without the hustle and bustle of the world intruding on one’s space, imagine actually being able to experience a profound calmness of mind that allows for stress management, while offering the psychological benefit of a feeling of inner peace. Imagine that profound relaxation, also allowing one’s body to recuperate faster and more thoroughly from illnesses and injuries. After suffering through five years of health concerns, Tricia Frederick – co• February 2017 • MN Valley Business

owner of Inner Vitality – decided she needed to figure out what to do to address her health concerns. After some searching of her symptoms online, she kept coming across a possible solution called “floating.” In fact, floatation therapy – besides being used as a stress management tool – was reportedly showing success easing chronic pains such as neck and back pain, migraines, spinal misalignment issues, arthritis, fibromyalgia, and other conditions. The more she looked into floating, the more she wanted to try it. She had to travel to Minneapolis to give it a try but she felt the benefits, immediately.

Cover Spotlight

14


“After my initial trial about one year ago, I spent every Friday that I could traveling to Minneapolis to float.”

He agreed and said they should write up a business plan. “So, I Googled how to write a business plan,” Frederick said.

Creation of Inner Vitality

Sensor y Deprivation

Scott Peterson and Frederick have been lifelong friends since attending kindergarten together. Over the course of their friendship, they often discussed going into business together, but they didn’t know what the business was going to be or look like. When Frederick brought the idea of floating as a business possibility to Peterson, he was a bit skeptical at first, especially since he was unfamiliar with floating. But Frederick was adamant. “This is it. It’s helped me and I think I could help so many others,” she told him.

Floating is actually sensory deprivation. At least, that was the old term for it. Technically, sensory deprivation means taking everything away, so that all one has is a quiet space, a complete calm. Each pod contains 10-11 inches of water. A typical float pod holds 220 gallons of water and 900 pounds of Epson Salt, so it is three times as dense as the Dead Sea, according to Frederick. “People go to the Dead Sea for healing purposes, so think of this as a smaller little piece of that brought here, to Mankato,” Frederick said. Each float pod creates a sense of zero gravity.

“Client’s feel as if their body is laying in the alignment that it should be in.” Brian Zins, has been a customer of Inner Vitality since it opened in November. Like Frederick, he’d Googled a lot of alternative approaches to health and wellness in the past and he’d also come across the idea of floating. “The idea of zero gravity and no pressure points, that’s one positive,” Zins said. “I’m also someone people would consider to be very tightly wound, so the idea of having an entire hour to myself, no cellphone, no external distractions, was really attractive,” he said. “I questioned whether I would be able to shut my mind off and really enjoy it. If I can go in there and turn my mind off, to enjoy the calm and quiet, the lack of external stimuli, anyone can.” Inner Vitality has two float pods. The water in each float pod is mostly salt—a solution which is inherently sterile. After each float, and anytime the pods are not in use, Inner Vitality’s purification system cleans the water. Between each session every float pod’s water is purified four times with a 5-micron filter and both Ozone and UV Light to purify and disinfect the water, Frederick said. For those worried about a claustrophobic reaction, clients are in control of their float pod lid, which may be left open, partially open or closed. Each float pod also features an intercom connecting to the front desk should a client need help or have any concerns. Each session can be personalized, so lights and sounds can also be playing in the pods. “Anybody could benefit from it. Whether or not you are dealing with stress, insomnia, mental health issues, injuries, athletic injuries, pain disorders – it’s phenomenal,” Frederick said. MV

Inner Vitality

301 Madison Ave #305 388-3000 Mondays thru Fridays 10 a.m.-8 p.m. Saturdays 9 a.m.-1 p.m.

MN Valley Business • February 2017 • 15


Carol Herden in her amboy studio.

World renowned livestock sculptor Amboy woman brings authenticity, realism By Heidi Sampson | Photos by Jackson Forderer

A

s a young child, Carol Herden longed for a particular collection of model Breyer horses. Born and raised on a working ranch in Montana, Herden grew up among the corrals and pasture of her family’s ranch, among the many animals that lived on their land. Despite Herden’s love of animals, her mother knew they couldn’t afford the Breyer horse collection she desired. So her mother developed a plan as she went to town and picked up clay. When she came home, she gave the clay to her daughter and said, “I think you just need to start making those (horses) yourself.” By the age of 12, she was sculpting her own horses. Today she owns and operates Carols Original WorkS of Amboy. Breyer’s model horses and cattle are world renowned for their authenticity and detailed accuracy. To achieve that level of excellence, Breyer works with top equine artists and sculptors. In 1995, Heden’s business celebrated the release of

her first horse sculpture through Breyer, the company whose horses she’d adored as a child. Breyer would release more of Carol’s sculptures from horses to PBR Bulls, with a total of nine pieces developed for Breyer between1995 and 2002.

Profile

16 • February 2017 • MN Valley Business

From Taxidermy to Sculpting

As an avid hunter, Herden also participated in taxidermy when she was younger. Her sculpting technique was greatly enhanced by her experiences with taxidermy, primarily because in taxidermy one must understand the intricate roles the bones, muscular structure, and shape of the animal’s outer layer to create a more realistic final piece. While in high school and throughout her college years, she worked for a Bronze foundry in Cody, Wyoming. During college, she took every art class she could, anything that spiked her interest or provided a deeper aspect to her sculpting while the Bronze foundry supplied her with the tools and skills to create


her own molds and wax castings. Shortly after leaving college, an eighteen-year-old Herden establish Carols Original WorkS in 1989. By the time she met Brian Vitcovich, her husband, she was already making her own molds and doing her own casting. When she married Brian, his career consisted of working on airplanes, which moved the couple to Milwaukee, Wisconsin. In Milwaukee, Carol was casting her cow figurines in a broom closet. Seeing his wife’s meager workspace and knowing there had to be a better way, Brian kept encouraging her and her sculpting process. When 9/11 happened, everything stopped for Brian, as he went back to college to specialize in manufacturing and engineering. As a result, the two ended up in Iowa, where Brian encouraged his wife to open a storefront capable of featuring her artwork. However, Brian’s job would bring him to Garden City. They moved their home to Amboy in 2010 and Carol continued her business from home. “By April of 2012, we fell into our building in downtown Amboy,” she said. “After the purchase, Brian and I did a complete remodel of what used to be a lawyer’s office, creating the studio and store we have now for Carols Original WorkS. The community has been ver y welcoming as we transitioned little by little from lawyer’s office to studio, we quit literally opened to the public in pieces.”

Sculpting to Trophies

Herden does all of her own production work with no outsourcing. Production includes everything from mold making, to hand casts, to the time she spends hand tooling and painting each piece, to the final sculpture, boxed and shipped from her studio to its new home. At one time, she created 35 different cattle breeds with her tag line consisting of, World’s Largest Producer of Cattle Figurines. The key to her success is an intimate knowledge of animals and communication with buyers to ensure that a particular breed matches what the purchaser sees and believes to be true of the

breed. “I can sculpt in flaws just as easily as I can sculpt in what they want,” said Carol. “It’s very important to keep the customer involved so that they get what they are looking for. Unlike a painting, a sculpture has eight views and they all have to be equally as good.” Today, Carols Original WorkS does everything from sculptures, to portrait colors, to custom laser engraving – which means she can draw the portrait of a pet and engrave the portrait onto anything – to trophies. She’s even found time to publish her own pictorial memoir, “A Cows Tale,” which celebrates the 25-year history of Carol’s Original WorkS. In the future, Herden looks to embrace 3-D Printing as a way of enhancing her product line. While her building is on Maine Street, she doesn’t necessarily rely on foot traffic even though those who come to her studio are able to purchase and see many of her creations. Technically, the storefront only represents a fraction of what she does for business and not everything she’s created is available in her store. Her clientele is worldwide with shipments going out to Finland, Denmark, England, Russia, China, Japan, Korea, South America, Brazil and Pakistan. “I understand livestock and the difference between the breeds of the animals,” she said. “That understanding and attention to detail is what my customers rely on. For instance, the Holstein Association developed their ideal model cow and bull in sculpture form at a convention in Saratoga, New York, in 2016. Before the auctioning of their livestock during the conference, they auctioned off the sculptures as a set, which sold for $6,000. That’s pretty incredible.” MV Hours: Fridays 10-5 By Appointment. Call 507-380-1330

Awards and Trophies Created For: n The American Royal Livestock Show in Kansas City, MO October 2016 n National Western Livestock Show (NWLS) in Denver, Co. n North American International Livestock Exposition (NAILE) in Louisville, KY n World Dairy Expo in Madison, WI October - 2016 n World Percheron Congress (held every 4th year in US) 2010 and 2014 n Iowa State Fair (Supreme Percheron Foal) n Maryland State Fair n Ohio State Fair n MN State Fair (Supreme Dairy) n World Hereford Conference (Canada) n Calgary State Fair (Canada) n NASCO Farm & Ranch Catalog – Created the Ideal Dairy Cow Models

Breed Associations Sculpted For:

ABS Global Genetics Beef Cattle Select Sires Genetics Angus Hall of Fame KY & TX Angus Association TX Santa Gertrudis Association Red & White Association Holstein Association Belted Galloway Association Galloway Association Southdown Sheep Association Suffolk Sheep Association Hampshire Sheep Association Columbia Sheep Association National Hog Association Kunekune Hog Association MN Boar Goat Association Iowa Percheron Association RMQHA Association (Racehorse Trophies) Canadian Brown Swiss Association USA Brown Swiss Association (Denmark) Viking Genetics (Finland) Ayrshire Association FNAWS Foundation of North American Wild Sheep SD Elk Foundation MN Valley Business • February 2017 • 17 n n n n n n n n n n n n n n n n n n n n n n n n


Rick Brockberg just opened Brock’s Discount Store.

A bit of everything

Brock’s Discount sells returns at low cost By Dan Greenwood Photos by Pat Christman

A

little bit of everything is how Rick Brockberg explains to new customers what’s for sale at Brock’s Discount Store, a new business on North Riverfront Drive in Mankato. Ever ything from home furnishings and

improvement to electronics and trampolines are found on the shelves. Brockberg says that a month from now the items will likely be completely different. Last fall he transplanted his business to Mankato from Lake Crystal when he discovered no other

Feature

18 • February 2017 • MN Valley Business


store like his exists here. He found that while customers were supportive in Lake Crystal, it was difficult to attract customers from other towns in the area. At first, Brockberg planned on selling returned items online only. He bought his first truckload from a guy he found on Craigslist who ran a retail store in the Twin Cities. That store owner’s success switched Brockberg’s thinking into having a store front instead. Now the vast majority of the items he sells are in person. He said that other local businesses have been a great help in getting the word out. Leaving a pile of fliers in break rooms is much more efficient than going door to door, and Craigslist continues to be a great avenue for showcasing specific items that have just come in. He’s able to sell these products well below their retail value by buying them at lower prices from businesses with discontinued and returned items. “A perfect example are my TVs,” Brockberg said. “People are buying it online. In the process of the television being shipped to them, they find it cheaper elsewhere. When this one arrives they put the return tag on it and ship it back to the company for free. It’s just not responsible for

the company to resell returned items with damaged boxes and return labels, but the TV is in the same condition.” He buys items in bulk, and that means he has to decide on whether to purchase the whole truckload and weigh the pros and cons of how sellable the items are. “With that I have to take the bad with the good stuff as well,” Brockberg said.

and of that, maybe 12 survived.” Now he inspects every item in the trailer to make sure everything is like new and working properly. It’s time consuming, with a truckload coming in every week, but it ensures high quality. So what items are his customers looking for? Brockberg says it depends on the person and the day. But one approach is to buy items that are seasonably appropriate. “After Christmas I store (Christmas items) and exercise equipment goes out for New Year resolutions,” Brockberg said. He tries to keep a diverse array of items on the shelves to meet the demands of the different people who come in. “Because I am advertising mostly on Craigslist, those customers are coming for the item I have listed,” Brockberg said. A lot of people don’t know what to expect when they come in. It’s kind of like Walmart, you go in for toilet paper and leave with a bunch of other stuff.” Some items can be downright weird. Take the Bidet, a special toilet popularized in Japan that squirts water up as an alternative to toilet paper. “I have it in the back,” he laughs. That’s one of the few items he sells online for Ebay. For Brockberg this business is a new endeavor, one he hopes to expand on. The items are always changing and he has made it a priority to visit other stores and talk with their owners to compare. “My goal is to sell everything well below retail price,” Brockberg said. “I want everything to be clean and in good condition.” MV

“After Christmas I store (Christmas items) and exercise equipment goes out for New Year resolutions,” Brockberg said. Making those decisions has been a significant learning curve. He recalls a blunder involving one of his first purchases in bulk. “I did buy one load that was really bad, I lost a lot of money on that one. It was a load of all flooring, window coverings and blinds. It almost seemed like they tried to break ever ything,” Brockberg explained. “They had a bunch of these plastic window coverings on the bottom of the pallet and they threw these flooring pieces on top and it wrecked them. I had probably 400 pieces of window coverings

MN Valley Business • February 2017 • 19


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The federal Energy Information Administration estimates that 24 gigawatts (GW) of new electric generating capacity was added to the American power grid during 2016. For the third consecutive year, more than half of these additions are renewable technologies, especially wind and solar. Of the 2016 renewable additions, nearly 60 percent were scheduled to come online during the fourth quarter. Renewable capacity additions are often highest in the final months of the year, in part, because of timing qualifications for federal, state, or local tax incentives. Monthly U.S. renewable electricity generation peaked in March as high precipitation and melting snowpack led to a monthly peak in hydroelectric generation and strong wind resources led to a monthly peak in wind generation. Most renewable generation comes from the Western census division, which accounted for the majority of the hydroelectric (63 percent) and solar (77 percent) generation in the United States in 2016. Wind generation was more evenly spread across the country with 37 percent occurring in the Midwest, 35 percent in the South, 24 percent in the West, and the remaining 4 pecent in the Northeast.

Small solar grows

Paape Distributing Company • Paape Energy Services • Paape Security Services MANKATO: 507-345-4828 • ROCHESTER: 507-289-4874

www.paape.com 20 • february 2017 • MN Valley Business

At the end of 2015, EIA began publishing monthly estimates for distributed small-scale solar photovoltaic (one megawatt or less) capacity and generation. As of October 2016, the United States had a total of 12.6 GW of smallscale solar PV installed. Of this capacity, 56 percent was in the


residential sector, 36 percent in the commercial sector, and 8 percent in the industrial sector. Monthly generation from small-scale solar PV peaked in July at 2.1 billion kilowatthours. The distinction between capacity and generation shares is important to recognize. Because nondispatchable technologies such as wind and solar facilities generate power only to the extent those respective resources are available, their capacity factors are typically lower than those of other resources.

Tax credits extended

The production tax credit for wind and the solar investment tax credit (ITC) were extended at the end of 2015. The tax credits include an eventual decline in value for both technologies with the PTC for wind expiring in 2020 and the ITC for large-scale solar declining from 30 percent to a permanent 10 percent and expiring for residential projects in 2022. New York, Oregon, and the District of Columbia extended and expanded their mandates for renewable electric generation to reach 50 percent of each state’s total electricity generation by 2030, 2032, and 2040, respectively.

Natural gas use

Total U.S. natural gas consumption averaged 75.1 billion cubic feet per day (Bcf/d) in 2016. Consumption should increase by just 0.4 percent in 2017 and by 2 percent in 2018. In 2017, increases in total natural gas consumption are mainly because of higher residential and commercial consumption based on a forecast of colder winter temperatures. In 2018, the electric power and industrial sectors are the main drivers of consumption growth. Based on forecasts by the National Oceanic and Atmospheric Administration, heating degree days should be 6.7 percent higher in 2017 than in 2016, which had a warmer-than-normal winter.

Crude oil up

Benchmark North Sea Brent crude oil spot prices averaged $53/barrel in December 2016, a $9 increase from November. This was the first month since July 2015 in which Brent spot prices averaged more than $50 per barrel Brent crude oil prices are forecast to average $53/b in 2017 and $56/b in 2018. West Texas Intermediate crude oil prices are forecast to average $1/b less than Brent in both 2017 and 2018

Pump prices stable

U.S. regular gasoline retail prices are expected to stay relatively low this year and next according to the Energy Information Administration. Gas prices are expected increase from an average of $2.25/gallon in December to $2.31 in the first quarter of 2017. U.S. regular gasoline retail prices are forecast to average $2.38 in 2017 and $2.41 in 2018.

Retail/Consumer Spending Vehicle Sales Mankato — Number of vehicles sold - 2015 - 2016 1,063 870

1500 1200 900 600 300 0

J

F

M

A

M

J

J

A

S

O

N

D

Source: Sales tax figures, City of Mankato

Sales tax collections Mankato (In thousands)

- 2015 - 2016

Includes restaurants, bars, telecommunications and general merchandise store sales. Excludes most clothing, grocery store sales.

$447 $434

600 500 400 300 200 100 0

J

F

M

A

M

J

J

A

S

O

N

D

Source: Sales tax figures, City of Mankato

Lodging tax collections Mankato/North Mankato - 2015 - 2016 70000

$56,559 $52,400

52500 35000 17500 0

J

F

M

A

M

J

J

A

S

O

N

D

Source: City of Mankato

Mankato food and beverage tax - 2015 - 2016 175000

$72,400

140000

$76,438

105000 70000 35000 0

J

F

M

Source: City of Mankato

A

M

J

J

A

S

O

N

D

C. Sankey

MN Valley Business • february 2017 • 21


Construction/Real Estate Residential building permits Mankato

Residential building permits North Mankato

- 2015 - 2016 (in thousands)

- 2015 - 2016 (in thousands)

18000

$1,207 $2,968

13500

4000

9000

2000

4500

1000

0

J

F

M

A

M

J

J

A

S

O

N

0

D

Source: City of Mankato

$452 $542

3000

J

F

M

A

M

J

J

A

S

O

N

D

Source: City of North Mankato

Information based on Multiple Listing Service and may not reflect all sales

Existing home sales: Mankato region - 2015 - 2016

Median home sale price: Mankato region - 2015 - 2016 (in thousands)

$153,500 $161,2500

250

300

214 192

240

200 150

180

100

120

50

60 0

J

F

M

A

M

J

J

A

S

O

N

D

Source: Realtors Association of Southern Minnesota

0

J

F

M

A

M

J

J

A

S

O

N

D

Source: Realtor Association of Southern Minnesota

Interest Rates: 30-year fixed-rate mortgage

Includes single family homes attached and detached, and town homes and condos

Housing starts: Mankato/North Mankato

— 2015 — 2016 5.5

- 2015 - 2016 40

5.0

15

30

4.5

11

4.1% 20

4.0 3.5

10

4.0%

3.0

J

F

M

A

M

J

J

A

S

O

N

D

Source: Freddie Mac

J

F

M

A

M

J

J

A

S

O

N

D

Source: Cities of Mankato/North Mankato

Commercial building permits Mankato

Commercial building permits North Mankato

- 2015 - 2016 (in thousands)

- 2015 - 2016 (in thousands) $202 4000 $1,211

12000 10000

3000

$1,744

8000

$1,279

6000 4000

2000 1000

2000 0

0

J

F

M

A

M

J

J

A

S

O

Source: City of Mankato

22 • february 2017 • MN Valley Business

N

D

0

J

F

M

A

Source: City of North Mankato

M

J

J

A

S

O

N

D

C. Sankey


Gas Prices Gas prices-Mankato

One big little firm. — 2016 — 2017

5 4 $2.32

3 2 1 0

$1.67

J

F

Bolton-Menk.com

M

A

M

J

J

A

S

Gas prices-Minnesota

O

N

D

Thank You for voting us #1

— 2016 — 2017

Auto Repair and Best Auto Mechanic 5 years in a Row!

5 4 3

$2.31

2 1 0

$1.77

J

F

507-387-1315

M

A

M

J

J

A

S

O

Archer Daniels Ameriprise Best Buy Crown Cork & Seal Consolidated Comm. Fastenal General Growth General Mills Hutchinson Technology Itron Johnson Outdoors 3M Target U.S. Bancorp Wells Financial Winland Xcel

D C. Sankey

Source: GasBuddy.com

Stocks of local interest

N

Dec. 8

Jan. 12

Percent change

$45.97

$43.67 $115.37 $44.15

-5.0% -3.0% -10.0%

$54.39 $26.20 $48.08 $24.95 $61.27 $4.00 $62.35 $35.38 $177.48 $71.32 $51.45 $39.25 $1.75 $40.79

+2.0% -5.2% -2.1% -5.2% -2.0% 0.0% -2.6% -21.0% +1.0% -8.4% -0.9% +1.3% -5.4%

$118.90 $49.31 $53.28 $27.63 $49.13 $26.33 $62.48 $4.00 $64.00 $44.70 $175.88 $77.84 $51.90 $38.75 $1.85 $39.25

+4.0%

1620 Commerce Drive North Mankato www.AustinsAutoRepairCenter.com

AUSTIN’S AUTO REPAIR CENTER INC.

BUSINESS BANKING

C. Sankey

MN Valley Business • february 2017 • 23


Agricultural Outlook

By Kent Thiesse

P

Net farm income for 2016 lowest since ’09

rofitability is the U.S. farm sector for 2016 was projected to be at the lowest level since 2009, based on the most recent “USDA 2016 Farm Sector Income Forecast.” USDA estimated 2016 total net cash income at $90.1 billion, which is a decline of 14.6 percent from a year earlier. Net farm income, which is adjusted for inventory changes, accounts receivable, accounts payable, etc., was projected to drop by 17.2 percent from 2015 levels to $66.9 billion in 2016.

Following are some highlights from the report: • Overall cash receipts on farms are expected to fall by 6.2 percent, or $23.4 billion in 2016, mainly due to a 12.3 percent decline in receipts for livestock and related products compared to 2015. • Total 2016 crop receipts are expected to increase slightly over 2015 levels, primarily due to an estimated increase of $5.3 billion in cash receipts for soybeans and oilseed crops in 2016, which was largely driven by an increase in soybean prices compared to a year earlier. In addition to soybeans, cash receipts for sugar beets and cotton also increased in 2016. • 2016 cash receipts from corn sales are expected to decline by approximately $2 billion, compared to 2015, and have declined by 36 percent from peak levels in 2012. Wheat receipts have shown a similar sharp decline in the past five years, and are projected to decline by another $1 billion in 2016. • Except for a slight increase in turkey receipts, 2016 cash receipts for nearly all other segments of the livestock industry declined compared to 2015 levels. Receipts for dairy and dairy products are estimated to have a two-year decline (2015 and 2016) of 31.2 percent, or $15.4 billion, from the peak level of $49.4 billion in receipts in 2014. Receipts from cattle and calves are expected to decline by $11.6 billion or 15 percent in 2016, while hog production receipts are likely to decline by about 7 percent, with poultry and egg receipts dropping by 18 percent in 2016. • Cash receipts for direct government farm program payments for 2016 are expected to increase by 19.1 percent, or $2.1 billion, compared to 2015 levels. This is due to higher payment amounts for both the “Price Loss Coverage” (PLC) and the county-based “Ag Risk Coverage” (ARC-CO) farm program options compared to a year earlier. • Total farm production expenses in 2016 are estimated to decline by 2.6 percent from a year earlier, which followed a decline of 8.1 percent in 24 • february 2017 • MN Valley Business

production expenses in 2015, compared to 2014 levels. Major factors in the two-year decline in farm-level expenses are lower crop input costs for fertilizer and fuel, and reduced feed costs for livestock producers, which are related to the lower cash grain prices in 2015 and 2016. • Total farm interest expense for 2016 is expected to decline by 3.8 percent from 2015 levels, primarily due to lower real estate interest expenses; however, interest rates are expected to rise slightly in 2017. The overall cost of farm labor is projected to increase by 5.4 percent in 2016. • Net expense for land rent is expected to decline slightly in 2016, with an estimated reduction of 1.6 percent from 2015 levels. A large percentage of the $19.8 billion in total land rental payments is paid to landlords who are not farm operators. • Total federal crop insurance indemnity payments, which can help offset lower crop receipts in some years, declined by $3 billion in 2016, compared to 2015 payments, primarily due to very good crop yields in many areas of the U.S. As farm operators analyze the outcomes from 2016 for crop and livestock production, they are also looking at profit potential for 2017 and beyond. Some farm operators are coming off a couple of low-profit years in a row in 2015 and 2016, and are deciding if they need to make any fundamental changes in their farm operation or overall management for the future. In addition to the 2016 U.S. farm income forecast, USDA also recently released their latest updated projections for the next decade (2017-2026). While there are likely to many variations in these estimates in the next ten years, the USDA projections can help guide farm mangers with long-range planning for their operation. USDA expects the U.S. gross domestic product (GDP) to increase by 2.3 percent in 2017, and then decline gradually after that. The cost for imported oil, which affects farm fuel and fertilizer expenses, is estimated to be $49.70 per barrel in 2017, with expected annual increases until 2026 to over $90 per barrel. The prime interest rate for ag lenders is projected to rise from the current level of 3.75 percent to 6.0 percent by 2022 and beyond. U.S. population growth will likely be less than one percent per year in the next decade. The USDA projections assume the provisions in the 2014 Farm Bill, or similar government farm programs, as a baseline for the ten-year projections.


Following are some of the latest projections for 2017-2026 : • Total U.S. crop acreage is expected to be 248 million acres in 2017, which is expected to decline to 243.3 million acres by 2026. Corn acres are expected to range from 86 to 90 million acres in the next decade, while soybean acres are estimated to be from 83.5 to 86 million acres per year, and annual wheat acres are estimated to stay below 49.5 million acres. • Average “trend-line” corn yields are expected to rise from 171 bushels per acre in 2017 to nearly 189 bushels per acre in 2026, resulting in total corn production increasing from the 2017 projected level of just over 14 billion in 2017 to approximately 14.8 billion in 2026. Corn usage for feed, ethanol production, and exports is expected to remain fairly stable in the next decade, as are the estimated corn carryover levels. The estimated on-farm corn price is expected to be $3.35 per bushel in 2016-2017 and then to rise gradually to $3.70 per bushel by 2026, which is the same as the corn target price in the 2014 Farm bill. • Average soybean yields are expected to be 47.9 bushels per acre in 2017 and then to rise gradually until 2026, ending very close to the 2016 record U.S. soybean yield of 52.5 bushels per acre. Both total soybean production and soybean usage are expected to increase over the next decade, resulting in fairly stable soybean carryover levels. The average U.S. on-farm soybean price is projected to be $9.35 per bushel for 2016-17 and then rise to near $9.55 per bushel by 2023 and beyond. • U.S. wheat production is estimated to increase from 1.9 billion bushels in 2017 to just over 2.1 billion bushels in 2026, primarily due to increases in average wheat yields over the next decade. Average on-farm wheat prices are expected to gradually increase to near $5.00 per bushel in the coming years, from the current wheat price of near $4.00 per bushel. • U.S. pork production is currently estimated at 25.8 billion pounds for 2017, and may decline slightly in 2018, before expanding to over 26 billion for remainder of the decade. Pork exports are expected to increase from current levels of just over 5.4 billion pounds to over 6.4 billion pounds by 2026. This will help the average live price for market hogs to increase from near $40 per cwt. in 2017 to near $50 per cwt. by 2026. Prices and profitability in beef cattle production, as well as in dairy production, are expected to be uneven and choppy in the next decade. There are some certainly some reasons for optimism in farm profitability over the next decade, especially given the projections for stronger export levels for most U.S. ag products. However, it does not appear likely that we will return to the robust farm profit levels that existed from 2010 to 2013 anytime soon. Of course, the big “wild cards” with future farm profits are year-to-year weather conditions, as well as any changes in Federal farm programs and U.S. trade policy in the coming years. Kent Thiesse is farm management analyst and vice president, MinnStar Bank, Lake Crystal. 507- 381-7960; kent.thiesse@minnstarbank.com

Agriculture/ Agribusiness Corn prices — southern Minnesota

(dollars per bushel)

— 2015 — 2016

8

$3.20

6 4 2

$3.03

0

J

F

M

A

M

J

J

A

S

O

N

D

Source: USDA

Soybean prices — southern Minnesota

(dollars per bushel)

— 2015 — 2016

20 16

$9.45

12 8

$8.26

4 0

J

F

M

A

M

J

J

A

S

O

N

D

Source: USDA

Iowa-Minnesota hog prices

185 pound carcass, negotiated price, weighted average

— 2015 — 2016

100 85

$53.85

70 55 40 25

$51.49 J

F

M

A

M

J

J

A

S

O

N

D

Source: USDA

Milk prices

Minimum prices, class 1 milk Dollars per hundredweight

— 2015 — 2016 25 22

$18.68

19 16

$18.51

13 10

J

F

M

A

M

J

J

A

S

O

N

D

Source: USDA. Based on federal milk orders. Corn and soybean prices are for rail delivery points in Southern Minnesota. Milk prices are for Upper Midwest points.

C. Sankey

MN Valley Business • february 2017 • 25


Minnesota Business Updates

■ General Mills sales slide

■ ADM sells GrainCorp stake

Profit at General Mills slumped 9 percent during its most recent quarter and the food company lowered its outlook for the year as it tries to win back customers. Like other big food companies, General Mills has been hurt as more Americans stay away from processed foods. The company has been tinkering with its recipes, adding more protein to Yoplait yogurt and using antibiotic-free chicken in Progresso soups. But yogurt and soup sales still fell in the second quarter. General Mills, which also makes Cheerios cereal and Betty Crocker cake mix, now expects organic net sales to fall between 3 percent and 4 percent for the year. It previously expected organic net sales to be flat or down as much as 2 percent. The Minneapolis company reported net income of $481.8 million, or 80 cents per share, in the latest quarter. That’s down from $529.5 million, or 87 cents per share, in the same quarter a year ago. Earnings, adjusted for one-time gains and costs, were 85 cents per share, falling short of the 88 cents per share Wall Street analysts had expected.

Archer Daniels Midland has sold its stake in the Australian grain handler GrainCorp Limited. ADM will sell its 20 percent stake in GrainCorp for $287 million). The company believes the sale of GrainCorp will further cut down its invested capital, which will provide increased cash to reinvest in other higher-return projects. This deal follows ADMs’ three failed attempts to acquire GrainCorp. In Nov 2013, the Australian government ruled out Archer Daniels’ takeover bid for GrainCorp on grounds of national interest.

■ 3M: ’17 looks good In his outlook for the company, 3M President and CEO Inge Thulin said 2017 looks strong for the company. “We are continuing to increase investments in targeted growth opportunities, which will help us deliver another year of efficient growth and strong cash flow,” Thulin said in a statement. 3M Co has been working to makes itself more profitable. This includes reorganizing its number of businesses from 40 to 25. It has also been making acquisitions and divestitures when it sees them as strategically beneficial. Plus, the company is investigating in further research and development, planning to spend $1.8 billion in research and development this year.

Employment/Unemployment Initial unemployment claims Nine-county Mankato region Major November Industry ‘15 ‘16 Construction Manufacturing Retail Services Total*

640 473 63 2,996 1,475

Local non-farm jobs Percent change ‘14-’15

738 261 46 2,921 1,337

+15.3% -45.0% -27.0% -2.5% -9.4%

Services consist of administration, educational, health care and social assistance, food and other miscellaneous services. *Categories don’t equal total because some categories not listed.

Minnesota initial unemployment claims Major Industry Construction Manufacturing Retail Services Total*

November ‘15 ‘16 12,355 5,871 1,443 6,707 26,376

12,141 4,599 1,482 6,220 24,442

- 2015 - 2016

Nine-county Mankato region

129,315

133000 122000 111000 100000

J

F

M

A

M

J

J

A

S

Minnesota Local non-farm jobs

Percent change ‘14-’15 -1.7% -22.0% +2.7% -7.2% -7.3%

Services consist of administration, educational, health care and social assistance, food and other miscellaneous services. *Categories don’t equal total because some categories not listed.

26 • february 2017 • MN Valley Business

O

N

D

- 2015 - 2016

(in thousands)

2,924

3000 2000 1000 0

J

F

M

A

M

J

J

A

S

O

N

D


■ Johnson finishes strong Racine-based Johnson Outdoors Inc. increased net income by more than 27 percent in fiscal 2016, despite a $2.1 million loss in the final quarter of the year. Johnson makes the Humminbird brand of fish finders and other marine electronics. The outdoor recreation company reported net income of $13.5 million for the year. Earnings improved from $1.06 to $1.34 per share. Revenue was up 0.8 percent to $433.7 million. “Looking forward, our long-term plan focuses on elevating our businesses to the next level of success through enhanced consumer intimacy, transformative digital sophistication and world-class innovation processes,” CEO Helen Johnson-Leipold said in a statement. The company credited new product performance for a 5 percent sales increase in marine electronics and strong marketplace momentum for its brands for a 3 percent increase in watercraft sales. The outdoor gear segment was down with sagging sales of military tents and the diving segment was down because of weakness in the Middle East. A $4 million drop in military tent sales in the fourth quarter alone contributed to a down end to the year.

■ Consolidated buys Fairpoint Consolidated Communications Holdings is buying buy broadband service provider FairPoint

Communications in an all-stock deal valued at $1.5 billion, including debt. Mattoon, Illinois-based Consolidated’s acquisition of Charlotte, North Carolina-based FairPoint marks the fifth such deal in the past two months as growing demand for data and video services drives companies to expand their fiber optic networks in new regions. Consolidated is a broadband and business communications provider in 11 states, including in the Mankato area. FairPoint provides service in 17 states. The deal will help Consolidated expand into northern New England, adding about 17,000 fiber route miles in the region.

■ Best Buy opens outlets Big Box retailer Best Buy is getting into the outlet business, with five locations across the country. Best Buy’s outlet stores will carry products that are mostly on clearance or from boxes that have already been opened, including TVs, appliances and computers. The products can also be refurbished or pre-owned, according to Minneapolis/St. Paul Business Journal. Outlet stores will give Minnesota-based Best Buy a chance to offer discounted items and display a larger collection of open-box products. The issue of returned merchandise is always a big concern for retailers. The outlet locations are in California, Delaware, Texas and North Carolina.

Employment/Unemployment Local number of unemployed

- 2015 - 2016

Nine-county Mankato region

(includes all of Blue Earth and Nicollet Counties)

8000

4,841

6000

November Unemployment rate Number of non-farm jobs Number of unemployed

4000 2000 0

Mankato/North Mankato Metropolitan statistical area

J

F

M

A

M

J

J

A

S

O

N

2015

2016

2.2% 58,862 1,297

2.4% 57,441 1,439

D

Unemployment rates Counties, state, nation Minnesota number of unemployed

- 2015 - 2016

200000 150000

96,182

100000 50000 0

J

F

M

A

M

J

J

A

S

O

N

D

County/area Blue Earth Brown Faribault Le Sueur Martin Nicollet Sibley Waseca Watonwan Minneapolis/St. Paul Minnesota U.S.

November 2015 2.2% 3.2% 3.6% 3.5% 2.8% 2.8% 3.1% 3.5% 4.1% 2.9% 3.1% 4.8%

November 2016 2.5% 3.2% 3.8% 3.7% 3.2% 3.2% 3.2% 3.3% 4.0% 3.0% 3.2% 4.4%

Source: Minnesota Department of Employment and Economic Development C. Sankey

MN Valley Business • february 2017 • 27


MORE THAN MARKETING. Aligning your business with Greater Mankato Growth through our menu of marketing opportunities positions you to reach more than 1000 businesses and thousands of people in the Greater Mankato region. Whether an ad in the eNewsletter or a top level sponsor - we offer a variety of opportunities to fit all types of businesses. Your investment not only helps to advance your business but also supports our many facets of work, from hosting high profile events to linking businesses with critical resources and information (to name a few). • • • • • • •

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28 • February- 2017 • MN Valley Business


SAVE THE DATE

GREATER MANKATO

AT THE CAPITOL WEDNESDAY, MARCH 8, 2017 Join more than 150 business and community leaders from the region as they celebrate and share why Greater Mankato is an economy@work!

To register and for more information visit greatermankato.com/capitol.

SAVE THE DATE Greater Mankato Growth, Inc.

ANNUAL MEETING Greater Mankato Growth

Join Greater Mankato Growth, Visit Mankato and City Center Partnership as we proudly share our accomplishments of 2016 as well as our goals for 2017 at this years Annual Meeting.

March 9, 2017 11:30 am - 1:00 pm Register online at: greatermankato.com/annual-meeting

MN Valley Business • February 2017 • 29


Greater Mankato Growth

Growth in Greater Mankato RIBBON CUTTING

GROUND BREAKING

RIBBON CUTTING

Inner Vitality 301 Madison Avenue, Suite 305 Mankato

Dunkin’ Donuts 930 Madison Avenue Mankato

MRCI - Client Directed Services 1961 Premier Drive, Suite 318 Mankato

RIBBON CUTTING

RIBBON CUTTING

NEW BUSINESS

MedExpress Urgent Care 921 Madison Avenue Mankato

Medifast 351 Madison Ave, Suite 119 Mankato

Northwestern Mutual 111 West Cherry Street, Suite 200 Mankato

RIBBON CUTTING

NEW BUSINESS

NEW BUSINESS

Nova Academy of Cosmetology 1701 Adams Street Mankato

Vivian Rose Boutique North Mankato

Whimsy & Weathered 523 North Riverfront Drive Mankato

Cavaliers

Body Concepts 1609 North Riverfront Drive Mankato bodyconceptsmankato.com

River Valley Aquascapes 204 Carroll Street Mankato

Master Electric 1653 Stadium Lane Mankato masterelectric.com

Rosengren Kohlmeyer & Hagen Law Office Chtd. 150 St. Andrews Court, Suite 110 Mankato rokolaw.com

Cavalier Calls on the Newest Greater Mankato Growth Members

30 • February 2017 • MN Valley Business


5:00 - 7:00 pm January 10 February 7 March 7 April 4 May 2 June 6 July 11 August 1 September 5 October 3 November 7 December 5

CliftonLarsonAllen MET-CON Construction, Inc. Pub 500 Discover Chiropractic, Body Concepts & Hatanpa Insurance Agency - State Farm iSpace Furniture & Tailwind Group KEYC News 12 and Fox 12 Mankato Unique Specialty & Classics Snell Motors Cambria MRCI - East Park Mayo Clinic Heath System Courtyard by Marriott Hotel & Event Center

7:30 - 9:00 am January 18 February 15 March 15 April 19 May 17 June 21 July 19 August 16 September 20 October 18 November 15 December 20

New Perspective Senior Living Regus Profinium, Inc. M² Lofts Kato Insurance Agency Advanced Pain Management AT&T Blethen, Gage & Krause Ecumen Pathstone Living True Facade Pictures Old Main Village City of Eagle Lake

2017 Business Before Hours Sponsored by:

November Business Before Hours hosted by Mayo Clinic Health System

December Business After Hours hosted by Eide Bailly

December Business Before Hours hosted by School Sisters of Notre Dame, Central Pacific Province

Business After and Business Before Hours gives representatives from GMG member businesses at the Engaged Level or higher an opportunity to get together with one another to exchange ideas and learn about each other’s businesses. For more information on these and other member events, visit greatermankato.com/events.

MN Valley Business • February 2017 • 31

Greater Mankato Growth

November Business After Hours hosted by BankVista


GRANT OFFERS OPPORTUNITIES FOR

I

By: Chris Willaert, Sports Commission Director

Greater Mankato Growth

t is our hope that most people know and understand the purpose of Visit Mankato and the Mankato Sports Commission. Our purpose is to get people who are not from the Greater Mankato region to travel to this area. Visitors of Mankato and North Mankato bring retail, hospitality, travel and tourism dollars and stimulate our economy. The economic impact of events, and specifically sports, is significant to our region. While the impact derived from events like baseball and softball tournaments, Vikings Training Manakto Marathon Camp and the Mankato Marathon is significant, there are, peaks and valleys throughout the year. Certain times of the year are much stronger than others. Currently the Mankato Sports Commission, through its Event Selection & Support and Marketing & Sales committees, is undergoing a process to restructure how we strengthen our valleys. The Sports Commission has a grant program that is designed to help get new events brought in or to help established events grow. Homegrown events like our Mankato Marathon and those being produced by local organizations and people such as GameDay CrossFit, Winter Blues Volleyball and Anthony Ford Pond Hockey represent a great way for us to grow the sports tourism industry in our area. The Sports Commission is also looking for more of these types of events. Based on data analysis reports we Anthony Ford Pond Hockey know that while September may not be a strong month in terms of sports tourism in our region, our hotel occupancy rates for that month are relatively strong overall. We rely on these hotel occupancy reports to help us identify when those valleys are truly occurring, not just in the sports realm but where it really matters - in our economy overall. If broken down into six-month time frames, our hotel occupancy

32 • February 2017 • MN Valley Business

GROWTH

is much higher May - October than it is November April, which comes down to our top-notch outdoor recreational facilities (Community Fields at Rosa Parks, Caswell North and South, bike trails, golf courses, etc.) but what lacks in indoor spaces (e.g.: ice, courts, turf) for the colder weather time of year. We can review this data on a monthly basis down to a specific week of the year. In 2016, the second weekend of February was stronger than the third weekend of August. Historically speaking, three of the lowest hotel occupancy weekends of the year fall on or around Thanksgiving, Christmas and New Years. The Sports Commission is researching what could be done to change those valleys into peaks without negatively impacting families. While the Sports Commission is very involved in the current regional recreation facility discussions and process, we are also firmly focused on strengthening our sports tourism economy with assets already in place. We rely on our community members Vikings Traning Camp for ideas and inspiration as to how we strengthen those valley weekends. We are looking for ideas of events we could create or bring to town. Maybe you know of or are involved in an event that is already here but needs help getting to that next level. This is not just through the grant program but may be through assistance like lining up hotel room blocks, helping to market or promote the event with media partners and social media platforms or helping to recruit and coordinate volunteers. If you have ideas, please bring them forward! For more information, go to our new website: mktosports.com. Or contact me at 507.385.6663 or cwillaert@visitmankatomn.com.

Softball at Caswell Park


THANK YOU FOR SUPPORTING CITY CENTER BUSINESSES!

Shop Small in the City Center was held on November 26, 2016 and featured 41 participating businesses. Hundreds of shoppers visited the unique, locally owned establishments in City Center Mankato.

Greater Mankato Growth

Crowd shopping during 2016 Shop Small Saturday at Arizona Olive Oil Co.

MN Valley Business • February 2017 • 33


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