Farm Incomes: Feast or Famine
Farm Incomes Bounce From Feast to Famine
HADDONFIELD, N.J. (DTN) -- Results of 2013 Minnesota farm incomes are in and, while median incomes crashed 78% 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 with Minnesota State Colleges and Universities and University of Minnesota Extension. 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," Nordquist 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.
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Shifting fortunes reflect sizable declines in the value of growers' grain inventory. A year ago, the 2012 corn crop was worth a record high of $6.49 per bushel. 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 per bushel for the 1,339 corn farms in the study. During that period, average cash rents more than doubled to $216 per acre, up from $103. Fertilizer costs mushroomed to $182 per acre, up from $71. Total machinery costs also pressured growers, running $157 per 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 the average cash-rent corn farm lost $65 per acre in 2013 after all costs, including charges for labor and management.
Nordquist said 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 per acre off top $400 rents, but he doesn't believe much adjustment happened in nearby Minnesota.
"Unless you can get well over 200-bushel 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.
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Marcia Zarley Taylor can be reached at Marcia.taylor@dtn.com
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