Agriculture is a major sector of Minnesota's overall economy. Former Senate Majority Leader Roger Moe said it's important to learn from the past and to put things in place to protect agriculture from a catastrophic failure. Moe summed up the current economic situation facing farmers in simple terms.
"Basically the red light on the dash board isn't on yet, but the engine is getting hot," Moe said.
Moe, from Norman County in Northwestern Minnesota, said farmers in his area are riding high now with strong crop prices and record high prices for farm land. But Moe cautioned that the history of business cycles shows that booms like this one don't last.
Others say you don't have to look too far back to see the perils of an economic bubble.
"The parallels to what has just happened in the housing market is frightening close," said report author Lee Egerstrom of Minnesota 20-20.
Egerstrom said the doubling and tripling of farm land prices in the past six years looks a lot like the housing bubble that started collapsing last year.
"We're right at the point where we can see the same thing happen that happened to all these young families who had creative ways of buying homes in the suburbs and are now having them be foreclosed on," Egerstrom said.
Tracy Beckman, a former state senator and director of the Farm Service Agency, said farmers may feel wealthy these days and take on too much debt. Record prices for corn and other crops have helped boost farm income. But Beckman said the cost of farming is also rising, with surging prices for inputs like fuel, fertilizer, seed and acreage rents.
"And the problem you run into is that when commodity prices start to turn down you don't see a corresponding dip in those input costs," Beckman said. "They are very slow to come down if they come down at all. And that's when the pinch can begin to show up."
Minnesota State Economist Tom Stinson agrees that farmers are in a boom period right now. But he said the Minnesota 20-20 report could be overplaying the potential for crisis.
Stinson thinks farmers have a long memory and will not get themselves into a tight financial spot like farmers in the 1980s.
"So I don't think people are going to get over extended the way they did the late 1970s and when the farm economy really hit the wall in the early 1980s. The damage was just so much that I think it's still well-remembered," Stinson said.
Farm income could go down suddenly due to changes in the global economy and commodity prices may plummet when speculators take their money out of the market. Steadily rising prices for commodities like corn wheat and oil have drawn what Citigroup recently referred to as a tidal wave of investment flows into commodity markets.
Former DFL House Minority Leader and 20-20 Chairman Matt Entenza said it's important for farmers and policy-makers to be prepared and learn from past economic cycles.
"Folks said the Internet boom wouldn't end. They said the housing boom wouldn't end. And the last piece holding up our Minnesota economy is our strong agricultural sector," Etenza said. "But the increases in commodity prices and in particular land prices is not sustainable over the long term."
The Minnesota 20-20 report recommends farmers pay down their debt, and become educated about the potential for a steep downturn. It also strongly suggests the University of Minnesota Extension Service be fully staffed to assist farmers in a financial crisis.