Financial counseling a key aspect of University of Minnesota assistance for farmers
Data shows 2018 to be one of the worst years for Minnesota farm income in decades.
By all accounts, 2019 looks like more of the same.
As difficult finances become the new normal, the University of Minnesota is offering a suite of assistance programs for farmers in Minnesota and around the country. Extension educators say their training programs, financial counseling and economic management courses have been popular with agriculture professionals throughout the state.
Commodity prices have fallen for producers while operating expenses remain high, an equation that puts strong pressure on farmers’ bottom lines, regardless of the commodity they grow or livestock they raise. Forces outside of the free market — primarily protracted trade conflicts with traditional international partners — have only made the situation worse.
“Right now, we have a lot of ‘wait and see’ going on in Minnesota agriculture,” said Michael Boland, a professor of applied economics at the University of Minnesota and director of the Food Industry Center.
In 2018, the median net income for Minnesota farmers was $26,055, according to data tracked by U of M Extension and agricultural Centers of Excellence within Minnesota State. That is the lowest level in at least 20 years. Nearly every commodity saw a down year: Crop income declined by 29 percent; dairy farms were down 65 percent and pork producers suffered a 77 percent decrease.
Facing declining farm incomes, in 2017 Extension launched a free financial counseling service for farmers dealing with economic distress. Minnesota farmers looking for an in-depth analysis of their economic situation or help dealing with banking and farm business management can call 1-800-232-9077 for a free consultation with University experts.
“Agriculture is very cyclical, so throughout time we have high periods and low periods,” said Megan Roberts, a Mankato-based educator on Extension’s Agricultural Business Management team.
“What is concerning about this particular time in agriculture is it has been a prolonged period of low commodity prices, and also low commodity prices across crops and livestock. At this point, we have an industry-wide issue, and it has been going on multiple years.”
Extension launched the financial counseling service amid warning signs indicating a prolonged downturn in farmers’ economic fortunes. It is, ironically, a situation that can be traced to the most recent economic upswing for farmers.
In the early 2010s, agricultural incomes were soaring. Commodity prices were high and farmers were producing record yields. The costs of production — land prices, rent, labor, etc. — soon increased to follow commodity prices, but farmers were selling enough product to cover those costs.
Commodity prices have since dropped: corn is selling for half as much today as it was in 2012, and soybeans are down by one-third. Meanwhile, expenses have not fallen, and farmers’ cash flow has suffered accordingly.
Experts predict conditions will deteriorate even further.
“Farmers have had a good equity position — they had cash in the bank and were able to use that to cover costs,” said Dave Bau, an Extension educator in Agricultural Business Management based in Worthington.
“A wet spring and late planting dates will cause lower yields for those farmers unable to get their crops planted in a timely manner. Even with recent higher corn prices, the lower yields will decrease or eliminate profits. Meanwhile, soybean prices remain low.”
Extension’s Ag Business Management team offers a handful of financial tools for farmers seeking assistance.
Mediation staff manage a phone line to help farmers navigate disputes with banks and other lenders. The team conducts in-the-field training on farm transfers and estate planning, recordkeeping and required management programs for farmers who borrow from the government. Educators conduct dozens of these trainings annually.
Farmers are especially interested in estate planning and farm transitions. Bau said he takes around 1,000 calls a year from farmers and landlords who need help managing the land costs of their operations. Some have been forced to sell their land to improve cash flow. In 2018, more than 300 people attended farm transition workshops that Roberts hosted alongside Minnesota State.
“The cash flows are the biggest issue,” Bau said. “Farmers, on paper, are still flush — they have assets, mostly land — but there is no cash flow. And that’s the financial strain that farmers are dealing with.”
Annually, more than 1,500 farmers nationally, including 300 Minnesotans, participate in strategic and financial planning conferences for farming cooperatives put on by Boland’s Food Industry Center.
Boland said ongoing trade wars and tariff disputes with large Minnesota trading partners — China, Mexico, Canada and Europe — have brought added uncertainty to an already-difficult situation.
“What is unique of the last 12-15 months is we’re seeing a reexamination of our pro-trade policies and I think it’s kind of confusing for a lot of people,” Boland said.
“People are still optimistic about the future, but these are uncertain times.”
Learn more about Extension’s farm financial counseling here, or by calling 1-800-232-9077.
Upcoming Ag Business Management events can be found here.
The Food Industry Center can be found at foodindustrycenter.umn.edu.