Farm profits fall from record levelsFarmers’ profits fell by more than half last year in North Dakota, and by nearly two-thirds in Minnesota. Although 2009 showed a big fall-off in net income for farmers in both states, the fall-off came from record years in farm profits. So the great majority of farmers still made money last year, and not bad money.
By: Stephen J. Lee, Grand Forks Herald
Farmers’ profits fell by more than half last year in North Dakota, and by nearly two-thirds in Minnesota.
So, thousands of farmers went broke, are homeless looking for jobs, right?
Well, not exactly.
Although 2009 showed a big falloff in net income for farmers in both states, it followed record years in farm profits.
So the great majority of farmers still made money last year, and not bad money.
But it was a big change.
In a report released this week out of North Dakota State University’s “Farm Business Management Education” program, Andy Swenson said a detailed study of the financial records of 529 farms across the state found an average net income of $86,665 for 2009.
Swenson, a farm management specialist for the North Dakota State University extension service who runs the farm management study, said last year’s average profit was down 51.9 percent from the average net income of $188,476 in 2008 from pretty much the same group of farmers.
The 2008 figure was down 6 percent from the 2007 average profit of $192,200, the record bountiful year for North Dakota farmers, when record high crop prices combined with great yields.
The study has been done for two decades and goes into specifics on each farmer’s income and expenses, what crops or livestock were grown, what prices were obtained.
A similar study done by the University of Minnesota’s Center for Farm Financial Management was released last month.
It found the average net income of 2,401 Minnesota farmers in the detailed study of financial records fell 62 percent last year to $53,780. The 2008 average profit of $141,754 dropped 9.1 percent from the record profit in 2007 of $156,012 of roughly the same group of Minnesota farmers in the study.
Both studies measure both the average net income and the median net income — which is the midpoint at which half the farmers fall below, half above a certain net income level.
It makes a big difference in both states because the biggest and most profitable farms skew the average.
“Median net farm income in 2009 (among the 529 North Dakota farmers) at $47,768 was substantially less than the average (net income),” said Swenson in a news release this week. “Highly profitable farms raised the overall average … The average net income of the top 20 percent of the most profitable farms was $318,895. The 20 percent least profitable farms lost an average of $55,493.”
So it was in Minnesota: the median net income of the 2,401 farms was $33,417 last year, much lower than the average net income.
In North Dakota, although net farm income was down drastically last year, it still looked pretty good in perspective. From 2002-06, net farm income in the study averaged $61,627, ranging from $54,804 in 2006 to $73,422 in 2003.
In Minnesota, meanwhile, last year didn’t look so good by historical standards.
The 2009 median profit figure of $33,417 is the lowest since 2001, when it was $23,368, and well less than the average median profit of $48,894 for the years 2002-2006.
Figures from both states include all kinds of farms, including all crops and most kinds of livestock.
And beef producers had a much tougher row to hoe last year than crop farmers, Swenson said.
“Higher costs and lower prices have been difficult on beef cow-calf producers the past few years,” Swenson said. “Hopefully, these negative trends peaked in 2009, when net income per beef cow was the lowest since 1996.”
Of course, a large part of that problem is the old see-saw: when crop prices are high, that makes feed costs for livestock producers high, too.
Last year, while crop farms in the North Dakota study averaged $122,962 in profits, beef producers averaged only $8,440 in net income.
Part of that math includes the fact that beef farms are smaller overall: gross revenues averaged $250,000, compared with nearly $700,000 in gross revenues for the crop farms in the North Dakota study.
For every $1 of gross revenue, beef farms squeezed only 3.3 pennies in net income last year, while crop farms netted 17.9 cents of every gross buck brought in.
Swenson said prices received last year by farmers for wheat, corn, sunflowers and flax fell by 25 percent or more from 2008 levels. Plus, some quality problems such as low protein in wheat led to further discounts at the elevator.
But prices for soybeans, dry edible beans such as pintos and navies, remained high. And record yields last year in North Dakota for spring wheat, durum wheat, barley, canola and field pea helped offset the effect of lower prices, Swenson said.
Another big factor were big, federally guaranteed crop insurance payments to North Dakota farmers, averaging more than $45,000 per farm for the second year in a row, Swenson said.
In 2008, most of the crop insurance payments were made because of drought cutting yields in western North Dakota; last year, it was the long, late spring flooding that delayed or prevented planting that caused the high crop insurance revenue.
The cost last year of growing crops was near the record hit in 2008, as high as $430 per acre to grow corn on cash-rented land in North Dakota last year, Swenson said. While fuel prices were lower, fertilizer prices remained mostly high, land costs didn’t abate, and some seed prices increased last year.
The two studies can be seen online at www.ndfarmmanagement.com, and www.cffm.umn.edu/Publications/pubs/FarmMgtTopics/2009MinnesotaFarmFinancialUpdate.pdf.
Reach Lee at (701) 780-1237; (800) 477-6572, ext. 237; or send e-mail to firstname.lastname@example.org.