“How profitable was farming in 2010?” The answer to that question probably depends on who you ask, where they live, whether they raise primarily crops or livestock and on-farm management decisions. The South-Central, Southwest, Southeast Minnesota Farm Business Management (FBM) Summary was recently released by the Farm Business Management Instructors. This summary includes an analysis of the farm business records from farm businesses of all types and sizes in southern Minnesota. This annual farm business summary is probably one of the best gauges of the profitability and financial health of farm businesses in the region on an annual basis.
A total of 1,226 farms from throughout south-central, southwest and southeast Minnesota were in the 2010 FBM Summary. The average farm size was 693 acres. The top 20% net income farms averaged 1,514 acres, while the bottom 20% net income farms averaged only 264 acres. 57% of the farm operations were cash crop farms, 18% were total livestock operations of one type and the balance were various combinations of crop and livestock enterprises. 277 farms (23%) were under $250,000 in gross farm sales in 2010; 363 farms (30%) were between $250,000 and $500,000 in gross sales; 357 farms (29%) were between $500,000 and $1 million in gross sales; and 229 farms (19%) were above $1 million in gross sales.
In 2010, the average farm business received just 11.3% of the net farm income from government farm payments. This percentage was 54.7% as recently as 2005. The average non-farm income in 2010 was $31,302, which was up slightly compared to 2010, but below the 2008 non-farm income level of just over $34,000. The average farm business spent $784,020 in 2010 for farm business operating expenses, capital purchases and family living expenses. Most of these dollars were spent in local communities across the region.
Farm Financial Analysis
Following are some additional key farm financial analysis figures from the 2010 Farm Business Management data:
- The average farm business had $708,501 in gross farm income in 2010, which was an increase of 4% from 2009, and was comparable to 2008 gross income levels.
- The average farm operating expenses for 2010 were $584,494, which were up slightly from 2009 expenses, and again were very close to 2008 operating expenses per farm.
- The average net farm income for 2010, after crop and livestock inventory adjustments, capital adjustments, depreciation, etc., was at a record level of $183,808. The strong 2010 net farm income was almost 200% above the 2009 level of $61,350, and was well above the very good years for average net farm income of $139,986 in 2008 and $149,940 in 2007.
- There was large variation in net farm income in 2010, with top 20% profitability farms averaging a net farm income of $513,631, and the low 20% profitability farms averaging a negative net farm income of ($116,856).
- The average farm business showed a net worth improvement of +$156,172 in 2010, which was up considerably from the modest net worth improvement of +$33,598 in 2009.
- Again there was a large variation in farm net worth improvement in 2010, with the 20% high profitability farms showing an average net worth increase of +$398,560, and the low 20% profitability farms showing a much smaller annual increase in net worth of $35,901.
- Total assets and total liabilities (debt) have risen steadily for the average farm business in recent years; however the average debt-to-asset ratio, which measures the solvency of the farm business, has dropped from 56% in 2002 to about 43% in 2010.
- In 2009, the average farm business borrowed about $390,000, which was an increase of $40,000 from 2009; however the amount of debt repaid in 2010 also increased by a similar amount.
Overall, crop operations were very profitable in 2010 – well above 2009 profit levels – due to higher grain prices and fairly steady crop input costs and land rents in 2010. Profits in the livestock sector improved significantly in 2010, compared to the previous two years, due to improved market prices and more stable operating expenses. The overall average financial health of the FBM farm businesses improved significantly in 2010, and is quite strong. Complete farm management results are available through the University of Minnesota Center for Farm Financial Management FINBIN Program.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected]