Farm Incomes Take Another Dip in 2017
Bumper crops and spotty upticks in earnings were not enough to save most sectors of Minnesota farming from the fifth consecutive year of thin profits.
Across all types of farms, nearly one-third of farmers lost net worth in 2017. Dairy farmers faced some of the toughest challenges as milk prices plunged in the second half of the year, a drop that continues in 2018.
The median farm income was $28,551 in 2017, down from about $36,000 a year earlier, according to key findings in the annual farm income analysis conducted by the University of Minnesota Extension and Minnesota State. While not at the crisis proportions of the 1980s, the economy was characterized by Extension economist Dale Nordquist as “slow bleeding” for farmers who began the year with fragile balance sheets and finances.
“Minnesota farmers came into this five-year downturn with very strong balance sheets,” Nordquist said. “But we see increased financial stress across Minnesota agriculture. Like any industry, every farm has a different cost structure and some farms are doing better than others. There is a lot of slow bleeding going on out there. It becomes a crisis for some individual farms who don’t have a strong enough balance sheet to withstand this extended downturn.”
The analysis examined data from 2,164 participants in the Minnesota State Farm Business Management programs and 104 members of the Southwest Minnesota Farm Business Management Association. Participating producers represent approximately 10 percent of commercial farmers.
Details of the analysis follow. The statewide results are compiled by at the University of Minnesota’s Center for Farm Financial Management into the FINBIN database at www.finbin.umn.edu.
Crop farms: Big yields, little profit
For the third consecutive year, Minnesota farmers produced bumper crops of Minnesota’s primary cash crops, corn and soybeans. But as has been the case each year, high yields did not produce high profits. The median crop farm earned $23,722, down from $46,831 in 2016.
“It seems like a lot of producers have been treading water these last few years, waiting for something to happen to improve prices,” said Aaron Brudelie, farm management instructor from Minnesota West Community and Technical College. “We’ve seen a little pop in prices these last few weeks, with production problems in South America. That has given producers a chance to sell some 2017 crops at a profit as well as a chance to lock in a little better price for some of their 2018 crop. We have a long way to go, but crop farmers are a little more optimistic about this next year.”
In Minnesota, yields topped 200 bushels for the second year in a row, up nearly 20 percent from the previous 10-year average. But the 2017 crop also was strong across the U.S. Corn Belt and internationally, increasing stockpiles and pushing prices below the cost of production for many farmers. Prices averaged $3.25 per bushel in 2017 after topping $7 per bushel just five years ago.
Producers whose costs include farmland rental lost an average of $25 per acre of corn.
Soybean yields didn’t reach corn’s levels, but were still 7 percent above the 10-year average at 48 bushels per acre. On average, each soybean acre contributed $28 to farm profits.
Farmers and ag economists are paying close attention to the international market in 2018. Last week, the White House announced tariffs on Chinese imports topping $50 billion, heightening concern about retaliation targeting American crops. Soybeans are Minnesota’s top agricultural export, with China their leading destination.
Mixed results for livestock producers
The median livestock producer earned only $32,800 from farm operations for the year. Hog producers had a big turn-around, after many lost money on pig production in 2016.
Stable milk prices in the first half of 2017 gave way to a market in which many Minnesota dairy farmers are operating at a loss.
“2017 was really a tale of two halves,” said Nate Converse, farm business management instructor at Central Lakes College in Staples. “For the first six months, we had relatively profitable prices, but the bottom fell out in the second half. Right now, many of the dairy producers I work with are losing $2 per hundredweight produced and the outlook does not look much better for 2018.”
The median earnings for dairy farms was almost $50,000, up from $31,500 in 2016. Yet, dairy farms are seemingly under the most financial stress across the state right now. The average dairy farm made $370 per cow, up from $135 in 2016, with producers receiving $17.94 per hundred pounds of milk, while production costs averaged $17.24.
Currently, most producers are receiving less than $15.50 per hundredweight.
Organic producers reported a better year, with an average among the 15 farms participating in FINBIN at $102,000 in 2017. Prices for organic milk are at about $33 per hundredweight, down slightly from $35 in 2016.
Pork producers were the only farms that as a group, had a profitable year in 2017. The median earnings for hog farms was just over $122,000 after losing almost $5,000 in 2016. Pork producers received almost 55 cents per pound produced, up from just under 50 cents in 2016. The average farm made about $11 per head finished. Prospects for 2018 are cloudy, according to Purdue economist Chris Hurt. Much depends on feed cost, which are inching up because of corn production problems in South America.
The median beef farm among this group of farmers lost money for the third consecutive year, netting a farm loss of $3,800 in 2017 compared to a loss of almost $12,000 in 2016. Cow-calf producers made about $17 per cow in 2017 after losing ($83) per cow in 2016. Cattle finishers, those who buy calves from cow-calf producers and raise them to market weight, made $137 per head, after losing ($77) last year.
For more news from U of M Extension, visit www.extension.umn.edu/news or contact Extension Communications at firstname.lastname@example.org. University of Minnesota Extension is an equal opportunity educator and employer.