Farm income rises for third year in a row
By Janet Kubat Willette
Date Modified: 04/25/2013 7:06 PM
PLAINVIEW, Minn. — In southeast Minnesota, Mr. Average Farmer owned 241 acres and raised crops on 642 acres in 2012.
Mr. Average had assets totaling $2,999,653; managed a debt of $1,209,663 and had a net worth of $1,789,990. His net farm income was $260,813 and he added $32,698 of off-farm income.
"It sounds like a good year, it sounds like a real good year," Eric Deters said at an April 10 Farm Business Management meeting in Plainview. Deters is Riverland Farm Business Management director and instructor. He shared numbers from the farmers and farm families who participate in the Farm Business Management program through Riverland Community College at last week's event.
The median net farm income for farmers participating in the program through Riverland was $176,593, an increase of $38,748 from last year. Net farm income is the return to the farmer and family for their unpaid labor, management and equity capital investment.
From a cash income standpoint, 2012 was the best year ever, with farmers from southeast Minnesota having an average cash income of about $990,000. But 2012 was also the highest year ever for cash expenses, which came in at about $790,000.
Deters advised producers to prepare for lower crop prices. A lag time generally exists between when crop prices fall and input prices are reduced. He wonders if land rents will retreat.
Projected cash flows for 2013 show it will cost 25 cents more to produce a bushel of corn in 2013, Deters said.
The farm business management reports released this month give a glimpse of what agriculture was like in Minnesota in the year past.
"Every year has its own little nuances," Deters said.
Pay attention to when the numbers were calculated, he said. The median net farm income of $176,593 reported by the farmers in the Riverland program would likely be less if calculated today as the value of grain inventory has declined since the measure was taken on Jan. 1.
The average farm total debt of about $859,000 increased from $773,361 in 2011, but that could be a reflection of pre-pays and tax planning done by farmers, Deters said. The number was calculated as of Dec. 31.
The average farm debt to asset ratio declined to 40 percent for the first time since 1996.
All types of farms (crop, dairy, hog, crop and beef and other) were profitable, which has happened each year since 2009, when hog, dairy and beef and crop producers lost money. For the purpose of the report, farms are defined by the source of 70 percent of their income.
The past three years have been good to agriculture, judging by the performance of the low 20 percent. Deters said in every industry the low group is usually not making money for whatever reason. However, when the average, low and high are all making money, it's safe to say it's been a real good year. The low 20 percent had a net farm income of $34,000 in 2012.
The average rate of return on farm assets was 13 percent, well above returns on certificates of deposit, Deters said, asking a few bankers in the room if they'd pay 13 percent on CDs.
The average farm family enrolled in the Riverland program spent $1,162,859 in 2012, with the majority, 47 percent, going to agribusinesses. Another 21 percent went to capital purchases and 10 percent went to rents and leases.
The average farm family spent $86,723 on family living, which amounted to 8 percent of farm family spending.
Crop year in review
The average farmer enrolled in the Riverland Farm Business Management program had an average corn yield of 179.9 bushels on rented acres. The high rented reported a yield of 199.5 bushels and high owned reported a yield of 192.5 bushels.
The average total direct and indirect cost per bushel of corn was $4.76. The average price of corn sold during the year was $6.13. The average return per acre of corn was $331.07.
For soybeans, the average yield per acre was 52 bushels with high owned at 57.8 and high rented at 58. The total direct and overhead cost per bushel of soybeans was $10.33 on average. The average price of soybeans sold in 2012 was $13.31. The average return per acre was $203.71.
Average milk production per cow in 2012 was 24,967 pounds. The cost per hundredweight of milk was $18.44 on average and the average price of milk sold was $19.28.