Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Tuesday 10/23/12

Are You Better Off Than Four Years Ago?

A random sample of 100 grain operations from AgriSolutions database hows net worths increased about 58% on average the past four years. But unlike the 1970s, most of these gains are from profits (shown as retained earnings in red) , not land or equipment inflation (blue bar).

It's the perennial election-year question: Are you better off than you were four years ago? For the majority of America's grain farmers, the answer is a definite yes.

A study of 100 highly diverse cropoperations in the AgriSolutions database found that farm equity had grown 58% between January 2008and December 2011. Unlike the 1970s, most of this growth was due to real earnings from operations, not just paper adjustments due to land and equipment inflation,AgriSolutions financial consultant Sam Bachman found.
In fact, this group earned $19.8 million from higher valuations on assets but another $33.2 million on retained earnings in calendar 2011. Thanks to crop insurance and higher commodity prices in 2012, farm incomes should also reach record levels again, USDA forecasts, so the trend is continuing.

Growth in total equity for these 100 farms hit $18.7 millionin 2008, $31 million in 2009, $46.8 million in 2010 and $64.6 million in 2011. That works out to more than $1 million in net worth gains for each operation over this four-year period.
In the 1970s, land inflation gave farmers a false sense of security as they watched their net worth balloon, noted AgriSolutionsBachman.Then interest rates reversed and much of that paper equity vanished. Lenders developed more cautious lending practices and vowed to base credit decisions on true profits, not paper ones.

In the past four years, farm prosperity has been real. "Today's operators aren't living off granddad's equity," Bachman said."They're earning it the old-fashioned way."

Editor's Note: AgriSolutions farm clients are scattered in 13 states and reflect the spectrum of grain operations from several hundreds of acres to over 10,000 acres. Larger farms merge results from more than one business entity to give an accurate reflection of total farm profitability.The sample used in this study may or may not be representative of the results experienced by every operation.

Read and comment on all past DTN Ag Business Benchmarks on the Minding Ag Business Blog.

Follow Marcia Taylor on Twitter@MarciaZTaylor


Follow me on Twitter@MarciaZTaylor

Posted at 9:27AM CDT 10/23/12 by Marcia Zarley Taylor
Comments (1)
Just finished corn harvest today,,,, no question, WAY better off then 4 years ago! Finally prices I can make money with, farming is no longer welfare dependent!
Posted by Jay Mcginnis at 8:58PM CDT 10/23/12
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