Back in the black: Minnesota farm incomes rose in 2010

Written by Jonathan Eisenthal

Crunching the numbers from nearly 2500 farms across Minnesota, a recent study found that the average farmer netted a 12.5 percent rate of return in 2010, up from 3.1 percent in 2009.

“Most Minnesota producers had a good year in 2010,” said Richard Joerger in a news release published this week. Joerger is system director for agriculture and business at the Minnesota State College and Universities system, which has just published a study of the incomes of 2500 farmers who take part in marketing education programs in the state. Joerger noted, “However, these results occurred in an extremely risky and volatile environment.”

A key element in cash crop farm profitability was the reduction of fertilizer cost, which dropped 27 percent and contributed to an overall crop production cost reduction of six percent. For livestock farmers, the cost of feed stabilized and prices for hogs and beef rose.

“We think it’s important to spotlight the volatility in these markets,” said Greg Schwarz, a farmer in Le Sueur, Minnesota. Schwarz raises corn, soybeans and turkeys and serves as president of Minnesota Corn Growers Association. “Some folks look at the current price of corn and soybeans and they think there’s little need for a USDA farm program. Looking back even one year, we see how important it is to provide a safety net for farmers. Agriculture provides economic strength for Minnesota when the rest of the economy slows down. The safety net assures the longterm economic strength of our Minnesota state economy.”

Breaking the findings out by different types of operations, the study found profits for cash crop farmers rose 169 percent compared to 2009, an off-year. 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. These figures measured prices on actual sales, but profit estimates included crops in storage that the farmer had yet to market–a year end price rise made the product in the bins very valuable and had a major effect on the total profit outlook for the year.

“We’re confident these farmers were able to execute sales on these crops. The estimated rise in income was across the board–crop and livestock farmers across a range of farm sizes,” said Dale Nordquist, Extension economist with the University of Minnesota’s Center for Farm Financial Management. “Many Minnesota farmers have already sold their crops for 2011 and they’ve locked in prices for their inputs so the positive financial outlook will continue for many crop farmers this year.”

Livestock farms also made a comeback. Minnesota hog farms earned median profits of more than $250,000 compared to losses of $73,000 in 2009. Nordquist noted that hog farming has a cyclical history of returns.

“When they make money, they make lots of money, and when they lose money, they lose a lot of money,” said Nordquist.

The rise in revenues for dairy farms meant a return to break-even status, and after a number of down years many dairies are in precarious condition. Nordquist observed that the public trimmed its food budget when the economy went into recession. Many people reduced purchases of cheese, for example, and the industry is still trying to come back from that, he said.

“Even small changes in habits can have a major effect–so much of our dairy production goes to cheese,” said Nordquist.

Though the study sample was not scientific, Nordquist noted that of the 80,000 USDA-registered farms in Minnesota, about 20,000 have sales above $100,000, which serves as Nordquist’s rule of thumb for a “commercial farming operation.” The study included financials for 2,362 farmers taking part in marketing education through the Minnesota State College and University System and an additional 97 farmers belong to the Southwest Minnesota Farm Business Management Association, which delivers educational programming provided by University of Minnesota.

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