State farm income increases slightly in 2011
By Janet Kubat Willette
jkubat@agrinews.com
Date Modified: 04/28/2012 9:50 PM
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PLAINVIEW, Minn. – Mr. Average Farmer in southeast Minnesota had a net farm income of $212,481 in 2011.
Mr. Average also owned 236 acres, raised crops on 617 acres, had assets totaling $2.5 million, managed debt of just more than $1 million and had a net worth of $1.5 million. An additional $26,817 came into the household in the form of non-farm income.
Non-farm jobs are important for the health insurance they provide for farm families, said Eric Deters, director of management programs for Riverland Community College, at an April 9 presentation for families enrolled in Riverland's farm business management program. The meeting was at Good Shepherd Lutheran Church.
Average numbers can be skewed by the size of operations, Deters said. A better measure of net farm income is the median net farm income, the number where half the operations are below and half are higher. For southeast Minnesota, the median net farm income in 2011 was $137,845, up a little bit from last year, Deters said.
There are 240 operations involved in farm business management programs in southeast Minnesota, Deters said. Statewide, there are 2,395 farms enrolled in farm business management education programs offered by colleges in the Minnesota State Colleges and Universities system.
The state's median net farm income was $123,041 in 2011, up slightly from the $121,451 reported in 2010.
These numbers come from data from 2,291 participants in the MNSCU farm business management programs and 104 members of the Southwest Minnesota Farm Business Management Association.
"While the net results didn't change much, there were a lot of moving parts involved in attaining those results," said Dale Nordquist, University of Minnesota Extension economist with the university's Center for Farm Financial Management, in a press release. "Crop producers saw higher prices, lower yields and higher production costs. Livestock producers generally received higher prices, but faced significantly higher feed costs resulting from high crop prices."
In 2010, strong net farm income numbers came from a change in the value of
inventory, Deters said, not necessarily in cash on hand. Farmers
cashed in on the value of that inventory in 2011. In 2010, the change in
inventory was $116,024. In 2011, that number decreased to $85,881. The
change in inventory isn't cash dollars, yet, Deters said, and there's the
potential of making more or less than that from inventory on the farm, be
in grain in the bin or cattle in the lot.
Farming was profitable in 2010 and 2011, with even the low 20 percent
making money, Deters said. 2011 was one of the best years farmers ever
had.
The low 20 percent of farms, those who are in the lower 20 percent of profitability, made a lot of progress in 2011, Deters said. Better commodity prices helped.
"They have a great opportunity to really make some difference here depending on what they do with what they have," he said.
There is reason for caution. While cash income set a new record in
2011, so did cash expenses. Cash expenses in 2011 where higher than cash
income from almost any other year, Deters said.
But 2011 was a year to put a smile on a farmer's face. The rate of return on farm assets was excellent, at 11.6 percent for the average producer in southeast Minnesota, Deters said. A farmer can't afford to put money in a certificate of deposit with that kind of return, he said.
Farm debt, which has been growing steadily since the early 1990s, declined in 2011. Deters admitted he was relieved to see the decline, saying the bar graph scared the beegeebees out of him with its ever lengthening bars.
Since 1999, farmers haven't paid back all they've borrowed, but they've never been so close as in 2011. The difference was only $20,000, Deters said.
Cash living expenses averaged $53,052 for the 73 southeastern Minnesota farm families who kept detailed records.
Where did the money farmers earned go? Most of the money going through each operation, 49 percent, went to agribusinesses.
Deters said the numbers that bankers want to know — current ratio, working capital, debt-to-asset ratio — all looking good. The low 20 percent has the highest current ratio they've had in the past seven years. The debt-to-asset ratio is fantastic, with even the low 20 percent of farmers generating income to pay off their debt. That adds sustainability to the industry, Deters said.
Zeroing in on enterprises, crop farmers were profitable, but saw their yield potential drop as the rain stopped falling last summer. To be defined as a certain type of farm, a farm must generate 70 percent of its income from that enterprise.
Statewide, the median net farm income for crop farms declined to $146,984 in 2011, down from $162,826 in 2010. Corn yields decreased from 181 to 156 bushels per acre and soybean yields fell from 45 to 39 bushels per acre.
In southeast Minnesota, corn yields were down 10 percent to an average of 179 bushels per acre. The average price of bushel of corn sold during the year was $5.22.
Soybean yields were flat, with the average yield at 47 bushels per acre in southeast Minnesota. The average price of soybeans sold during the year was $11.52.
Alfalfa yields were down, too, with a $137.85 return per acre.
Average milk production per cow in Minnesota was 23,072 and the cost to produce that milk averaged $18.41 per hundredweight. The average price received was $19.96 per hundredweight.
"We've got some great potential this year, fantastic potential," Deters said. "You're doing a fantastic job. Keep it up."