ÑÇÖÞÎÞÂë

Rate of return for the average farm went from 3.1 percent in 2009 to 12.5 percent in 2010

The median net farm income among crop farmers more than doubled, and livestock farmers moved their median net farm income back into the black in 2010, a new joint report by the ÑÇÖÞÎÞÂë Colleges and Universities and the University of Minnesota shows.

Overall, median net farm income was $119,915 among about 2,500 Minnesota farms in 2010, up from $33,417 in 2009, when net farm incomes were depressed by low profits in the livestock sector and increased production costs, the analysis shows. Median net farm income means half of the producers earned more and half earned less.

“Most Minnesota producers had a good year in 2010,” said Richard Joerger, system director for agriculture and business at the ÑÇÖÞÎÞÂë College and Universities system. “However, these results occurred in an extremely risky and volatile environment.”

“The biggest change in 2010 was the return to profitability of hog farms, which tend to be larger in gross sales than other Minnesota farms,” said Dale Nordquist, Extension economist with the University of Minnesota’s Center for Farm Financial Management. In 2010, hog farms earned median profits of more than $250,000 compared to losses of $73,000 in 2009.

The report analyzed results from 2,362 participants in the ÑÇÖÞÎÞÂë Colleges and Universities farm business management education programs and 97 members of the Southwest

Minnesota Farm Business Management Association. Net farm income is used for living expenses, income taxes, retirement and business reinvestment.

For crop farms, the median net farm income increased to $161,441 in 2010, up from $60,128 in 2009, Nordquist said. Increased profitability was driven largely by the run-up in crop prices at year-end. Prices received on sales were actually down.

“Most of the increase in crop farm earnings was reflected in increased values in inventory on producers’ balance sheets at the end of the year. Producers have to sell those crops at profitable prices to realize these profits, but they certainly have had that opportunity,” Nordquist said.

“Dairy producers made some comeback in profitability. Yet many still produced milk at break-even prices or at a loss,” Nordquist said. The median dairy farm made a net farm income of $57,853 in 2010 compared to just over $2,000 in 2009.

“Agriculture is one bright spot for the Minnesota economy,” Joerger noted. “The farms that participate in our farm business management education programs contribute $1.4 billion to rural Minnesota’s economy.” The analysis also showed:

• As usual, there was wide variation in returns. The 20 percent of the farms with the highest incomes earned a median net farm income of $462,348; the median for the low 20 percent was $7,443.
• Profits for crop farmers were up 169 percent after a down year in 2009. Average prices received for major commodities were: corn, $3.67, down from $3.81 in 2009; soybeans, $9.66, down from $9.84; and spring wheat, $5.03, down from $5.81.
• For the 423 dairy farms, median net farm income was $57,853, compared to $2,193 in 2009. The average price received for milk was $16.26 per hundred pounds, up from $13.56 in 2009. Production costs increased to $16.19 per hundredweight, leaving a profit of only pennies per hundred pounds of milk.
• The median hog producer earned a net farm income of $265,649 compared to a loss of $73,525 in 2009. The price per hundred pounds sold increased from $43.30 to $54.63.
• Beef farm profits improved but were lower than other operations. The median beef producer generated net farm income of $34,451 compared to a net loss of $13,138 in 2009.
• Corn yields were virtually unchanged from 2009 at 181 bushels per acre. Soybeans yields averaged 45.5 bushels per acre, up from 42 bushels, while spring wheat yielded 60 bushels compared to 62 bushels in 2009.
• Average cost of production for an acre of corn decreased by 6 percent due mostly to lower fertilizer costs. Seed cost increased 9 percent, fertilizer decreased by 27 percent, and land rent increased by 5 percent.
• Overall, the average farm earned a 12.5 percent rate of return on assets, up from 3.1 percent in 2009.

“The need for business management education is as critical as ever in this economic environment,” Joerger said. “We encourage producers to contact a Minnesota farm business management education instructor or University of Minnesota Extension to enroll in an education program.”

Qualified instructors teach producers how to maintain and interpret quality business records. Information from the records is used to make business decisions, execute marketing plans and develop annual business analyses. The information from the personalized annual business analyses is used to apply business management information to improve their farming operations.