Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Wednesday 04/02/14

Farm Incomes Bounce from Feast to Famine


The 2013 corn crop cost Minnesota cash renters an average net loss of $65/acre after all expenses, including management and labor. Results would have been worse without an average $95/acre crop insurance indemnity.




Results of 2013 farm incomes for one of the Midwest's top corn states are in: While median incomes crashed 78% in Minnesota compared to a year earlier, no one is predicting catastrophe just yet.

Overall, 2013 net farm income was $41,899 for the median farm enrolled in record systems that Minnesota State Colleges and Universities and University of Minnesota Extension compile. That's a stunning plunge from the $189,679 reported in 2012 and may represent the steepest correction in the system's record books, said Dale Nordquist, Extension economist at the University of Minnesota's Center for Farm Financial Management.

It's also the worst overall performance since the "blood bath" of 2009 when the same farm database reported median incomes of about $33,373. Altogether 2,063 farms participated in the current analysis.

"I'm not sure all of this has hit farmers yet," he told DTN. "Cash flow in 2013 was pretty good because of the hangover sales on 2012 crops. But this really reflects the deflated value for the crop and the high cost it took to grow it." Livestock farms didn't fare much better, as dairy, hog and beef incomes also slipped.

Shifting fortunes reflect sizable declines in the value of growers' grain inventory. A year ago, the 2012 corn crop was worth at a record high of $6.49/bu. By New Year's Eve 2013, that price spiraled to $4.39, a 32% plunge. In both cases, growers had postponed sizable sales for tax purposes, hoping to push their tax liabilities as far ahead as they could, he said.

Escalating costs of production compounded the problem, particularly on cash rented corn farms (see table). Total costs of production have escalated since 2006, pushing breakeven prices to an average $5.20/bu. for the 1,339 corn farms in the study. During that period, average cash rents more than doubled to $216/acre, up from $103. Fertilizer costs mushroomed to $182/acre, up from $71. Total machinery costs also pressured growers, running $157/acre in 2013 versus $83 in 2006. Seed costs also jumped, although not as much as other production costs on a per acre basis.

The net result was that the average cash rent corn farm lost $65/acre in 2013 after all costs, including charges for labor and management.

Nordquist says he "doesn't have a feeling" that those results will be corrected in 2014 and faults cash rents for failing to reflect the strain on farm budgets this year. Illinois farm managers recently reported that rents charged on professionally managed Illinois farms will dip 5% this year, maybe knocking $20/acre off top $400 rents, but he doesn't believe much adjustment happened in nearby Minnesota.

"Unless you can get well over 200 bu. corn on some of these farms, a lot of these rents won't cash flow," he said.

To float their farms in 2014, many growers will be dipping into their working capital--perhaps by selling some of their carryover 2013 stocks, Nordquist said.

Fortunately most operators also possess strong credit ratings that would be the envy of any other industry. At year-end, only 0.2% of the farm loans held by AgriBank, a Farm Credit Lender that finances 238,000 in more than a dozen Grain Belt states, were classified as adverse.

"It's not a crisis for most people, but it will be difficult for individuals who've lost some rented land and now have excess equipment--or people who paid too much to keep the land they had," Nordquist said.

Follow me on Twitter@MarciaZTaylor


Posted at 3:52PM CDT 04/02/14 by Marcia Zarley Taylor
Comments (20)
Marcia, you should be ashamed! To even put the word famine in the headline is insulting to all Americans. I'm sure you didn't bother to look at the FINBIN data did you? If you did you wouldve noticed that the average MN farmer spent over 114000!!! on living and personal expeditures last year! That is a lot of resturant meals, vacations, harleys, house remodels, etc for folks suffering from famine. Do you realize that the average MN farmer has a net worth of 1.6 million? I would love for you to spend time in main street America and seek sympathy for millionaire farmers living high on the hog when a good portion of the US has literally no net worth and would love to have 50k per year to spend on living. You really need a reality check, WOW!
Posted by Bill Billson at 8:13AM CDT 04/03/14
"When the people find that they can vote themselves money, that will herald the end of the republic. Ben Franklin" Sounds a whole lot like what is happening with ethanol blending mandates.
Posted by T Kuster at 1:52PM CDT 04/03/14
"When the people find that they can vote themselves money, that will herald the end of the republic. Ben Franklin" Sounds a whole lot like what is happening with ethanol blending mandates.
Posted by T Kuster at 1:52PM CDT 04/03/14
Always looks greener on the other side of the fence. When the bottom drops out of a market (land, livestock, grain, stock market, housing) you can't get out from under it fast enough. Financial ruin follows. Wonder who would feed the country if farmers go under. China maybe!!! Makes you feel warm and cozy does it not????
Posted by Gale Schaefer at 8:27AM CDT 04/05/14
Those with millions in net worth have a safety net and have no right to be sticking the taxpayer for billions in investment/profit guarantees.
Posted by T Kuster at 8:57PM CDT 04/06/14
Bill, I think you've gone a little overboard misinterrupting with the numbers. Average family living expenses for Minnesota farm families were $65,150 in 2013, hardly high on the hog. True, that's up from $52.771 in 2012, and something Nordquist worries about, but pretty frugal Scandinavian standards in my book. I hate to begrudge farmers who want a lifestyle on par with their suburban peers one single year, especially after waiting 40 years for decent crop prices. Total living, investments and capital purchases--did run $114,565 in 2013--but some of those items can include farmland buys or other capital improvements that will benefit the farm long-term.
Posted by Marcia Taylor at 11:44AM CDT 04/07/14
Ok, this set this record straight, Farmers get up to 65% of their insurance premiums reimbursed EVER YEAR from tax payers, so a 40k policy is over 22k back to them, PLUS the insurance checks for falsified yields( yes more and more farmers are doing this now, just not getting caught, I tired of hearing this "they feed the world" , they are a business(most are corps now, not family farms). the only time they should get help is when a disaster happens, the massive erosion that is happening is just insane, just to get a government check. Sad, oh by the way, we have a family farm to for 5 generations. My grandpa never go a check, he saved money from the good years to cover the bad years....that 114k is net, clear. So he already made purchases, our neighbor that rents our land, buys 120k boats, a new cabin 400k and 2 new pickups(every yr) and he built a 600k house, that's just in one year!!,,so stop with this bs of famine crap. enough is enough
Posted by ryn bohr at 12:31PM CDT 04/07/14
Government has no business guaranteeing anyone a profit and since many farmers have no land costs and since fci covers most land costs, obviously many farmers are receiving annual profit insurance with a large part of the premium paid for by the taxpayer. And due to the extreme corruption of many congressmen these birds see nothing wrong with giving those with the greatest profits the largest profit guarantees. Obviously these clueless congressmen have never run a business in a highly competitive industry where the government guarantees the most profitable businesses the greatest profits. Marcia, why are you such a cheerleader for big government schemes that steal from smaller farmers any reasonable chance of competing in the ag industry?
Posted by T Kuster at 1:41PM CDT 04/07/14
Yeah Ryn if that is your true name, stop the bs. Which is it? Do you have a 5 tear generation farm? It seems to me if you really did you wouldn't rent it out if you really were a farmer!!!
Posted by KEITH PEARSON at 5:10PM CDT 04/07/14
I would say 65,000 is pretty good living.
Posted by Raymond Simpkins at 8:08PM CDT 04/08/14
For what it is worth, in our part of the state, the average corn acre generated a negative $79.00 per acre, after crop insurance.
Posted by Bonnie Dukowitz at 6:44AM CDT 04/12/14
If growing corn on your land produces a loss for you Bonnie, do not grow corn. If you want corn grown on your land or land you used to own Bonnie, rent or sell your land to someone with a high enough proven yield that will guarantee that person a profit.
Posted by T Kuster at 8:50AM CDT 04/12/14
People are always caught up by rhetoric it seems. We always forget that we have the most affordable as well as the safest to eat food in the world, partially because of the government subsidies that give them some control. Yes, I do think there should be limits based on a farmers income, giving other smaller or new farmers a chance to farm. The less farmers we have the more control the large farms have over the commodities. I think you can be as large of a farm as you wish, but if you show a certain level of income there should be no assistance or a limit. Also, I work for a large employer. Through this employer we have pre tax benefits for healthcare, investments, and retirement. I don't hear anyone saying that these funds should be taxed or eliminated?
Posted by Ryan E at 3:11PM CDT 04/13/14
You missed the point, Kuster. I was commenting on your obsession of guarantees. Some years are good, some are bad. Crop insurance is not in any way, what your obsession is. If food producers did not plant a crop, which is always risky, this country would certainly have an obesity problem. I raise enough to nourish myself and my family. Do you?
Posted by Bonnie Dukowitz at 9:06PM CDT 04/13/14
Adjust to it Bonnie - As long big government is fixated on continually awarding those with the greatest probability of the greatest profits larger investment/profit guarantees aka benefits of greatest value, many people will be financially harmed and will be justifiable irritated. Your questioning my agricultural productivity and ability or inability to provide is evidence of your incompetence, redundancy, and lack of comprehension.
Posted by T Kuster at 7:35AM CDT 04/14/14
Good grief, Kuster. What do you not understand? Any and all business's, including growing corn, will have a loss at some point. Crop insurance is just that, Insurance! Not a guarantee. Good grief!
Posted by Bonnie Dukowitz at 7:45PM CDT 04/14/14
Insurance, government guarantees, and profitability are highly fluid concepts when you consider the billions in premium subsidies and billions in other subsidies involved in the extremely corrupt crony capitalistic big government schemes such as federal crop insurance and obamacare. There are no end of comparisons that can be made between these schemes. Many of those benefiting from the frequent occasions where the government is providing profitability insurance would not dream of admitting that they have in fact received profitability insurance. More evidence of how fluid a concept insurance is can be found in http://www.nationalreview.com/article/375726/progressive-insurance-victor-davis-hanson
Posted by T Kuster at 7:30AM CDT 04/16/14
Good Grief! Too bad the taxpayer has to provide financial guarantees for the EWG, PANNA, etc.
Posted by Bonnie Dukowitz at 10:14AM CDT 04/16/14
How come if farming is so good how come your not in it?
Posted by RODNEY YOST at 7:33AM CDT 04/25/14
I do believe everyone on this comment thread is an active farmer or farm owner.
Posted by T Kuster at 12:34PM CDT 04/29/14
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