Minnesota farm incomes showed continued strength in 2011, a new joint analysis by the Minnesota State Colleges and Universities and the University of Minnesota shows. But incomes did not soar as might have been expected given extremely high crop prices.
Overall, median net farm income increased by just 1%—less than the rate of inflation—across the 2,395 farms that participate in MnSCU's farm business management programs. The median farm's net income was $123,041, up from $121,451 in 2010.
The report analyzed results from 2,291 participants in the MnSCU farm business management education programs and 104 members of the Southwest Minnesota Farm Business Management Association. Net farm income is the farm's contribution to family living expenses, income taxes, retirement and business growth.
"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 U's Center for Farm Financial Management. "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."
Richard Joerger, MNSCU's system director for agriculture and business, said: "In addition to soil moisture issues, Minnesota farmers continue to face a volatile business environment in 2012. Business management and risk management are keys to success in this environment."
"Even with record high crop prices, crop farms saw a slight decrease in profitability," Nordquist said. "Crops farms were still very profitable, but the lack of rain at the end of the growing season along with increasing production costs kept them from attaining higher profits."
Dairy and hog farms were more profitable than the previous year. Livestock and milk prices were generally strong enough to compensate for high feed prices. "It helps that most Minnesota livestock farmers grow a lot of their own feed," Nordquist said. "That is an advantage for this part of the country in this period of high crop prices."
For crop farms, the median net farm income declined to $146,984, down from $162,826 in 2010. The average price received for corn was $5.17, up $1.50 per bushel. Soybeans averaged $11.35, up $1.69 per bushel. But profits were held down by lower yields and a 15% increase in production expenses. The statewide average corn yield was 156 bushels per acre, down from 181 in 2010. The average soybean yield declined from 45 to 39 bushels per acre.
Dairy producers made another step in their recovery from losses incurred in 2009. The median dairy farm earned $90,821 in 2011 compared to $67,838 in 2010. Dairy farmers received $19.96 per hundred pounds of milk, up from 16.26, while production costs increased by 17%.
The median earnings of hog farms was $302,888, up from $275,903 in 2010. The price of market hogs increased from $55 to $66 per hundred pounds on a live weight basis. Beef farm incomes increased from a median of $62,833 in 2010 to $72,134 in 2011. The price received for live cattle sent to market increased from $92 to $113 per hundred pounds.
Taken together, the Minnesota farms participating in the statewide analysis were profitable in 2011, earning an average rate of return on assets of 11.4%. "Agriculture continues to be a bright spot for Greater Minnesota and the state's economy," Joerger said. "Farmers enrolled in the FBM program contributed more than $1.8 billion to rural Minnesota's economy in 2011."
Farm business management education instructors teach producers how to maintain, interpret and use quality business records to develop business plans, make key decisions, and execute marketing plans throughout the year. The producer's personalized annual whole business and enterprise analyses become the "textbooks" used for making business decisions throughout the year.
The statewide results are compiled by the Center for Farm Financial Management and stored in the FINBIN database which can be queried at www.finbin.umn.edu.