Net farm incomes varied widely in 2008
Farmers continue to be a primary and growing source of the economic vitality of rural communities in Minnesota. Statewide data from the Minnesota Farm Business Management Education program and the Southwest Minnesota Farm Business Management Association reveal that in 2008 and 2007 the average producer spent over $769,000 and $669,000, respectively.
Influenced by the economic downturn and fluctuating commodity prices and inputs, the median net farm income was down 15 percent in 2008 for the 2,417 farms that participate in Minnesota State College and Universities and University of Minnesota Extension farm management programs. The median net farm income for all farms was $90,039 compared to $105,489 in 2007.
When compared to historical levels, cash crop farms continued to produce relatively high profits, but high feed costs severely reduced the profitability of the livestock sector.
Highlights from the 2008 results include:
The median level obscures the wide variation in income levels experienced by Minnesota producers.
Net farm incomes actually varied widely. The median income of the 20 percent of farms with the highest profits was $350,470. The median for the 20 percent with the lowest profits was $-4,927.
Crop farms showed continued strong profits with a median net income of $130,252, down slightly from 2007. The average price received for corn was $4.17 per bushel, up from $3.01 in 2007. The average price received for soybeans was $10.30 per bushel, up from $7.14 in 2007.
The median income for dairy farms was down 38 percent at $58,081, compared to $93,462 in 2007. The average price received for milk was $19.46 per hundred pounds (18.64 in 2007), but high feed costs helped push the average cost of production to $18.09 ($15.62 in 2007). Feed costs per cow increased by 22 percent.
Hog farms suffered severe reductions in income due to high feed costs. The median hog farm earned $4,876 compared to profits of $65,720 in 2007. Feed costs per head increased by 35 percent for wean to finish producers.
Beef farms continued to experience weak profitability. Median net farm income for beef farms was a loss of $-6,810, down from profits of $8,911 in 2007.
Average cost of production for an acre of corn increased by 27 percent. Seed cost increased 20 percent, fertilizer by 42 percent, fuel by 33 percent, and land rent by 16 percent.
Overall, the average farm earned an 8.5 percent rate of return on assets, down from 11.4 percent in 2007 with assets valued at estimated market value.
The year ahead will likely be less profitable for crop producers, according to Dale Nordquist of the University's Center for Farm Financial Management.
"Prices are down and costs, in particular fertilizer, are still high. It's hard to see a scenario at this point where crop farms will maintain these types of profits in 2009."
But reduced feed costs will help livestock producers, says Gary Thome, Farm Business Management instructor with Riverland Community College.
"We are hopeful that reduced feed prices will bring some profitability back to pork and beef production. But dairy producers are now in red ink with current low milk prices."
Dick Joerger, system director for agriculture for the Minnesota State Colleges and Universities system, encourages the producers and their lenders to continue to look to the instructors of the Minnesota Farm Business Management Education Program and University of Minnesota Extension's Southwest Farm Business Management Association to further learn how to position their operations in these dynamic times.
Reports on the full database are available on the FINBIN Web site at http://www.finbin.umn.edu/.