Minnesota farmers were largely spared from the drought that severely impacted much of the Corn Belt during the summer of 2012, according to an analysis conducted jointly by Minnesota State Colleges and Universities (MnSCU) and University of Minnesota Extension. The analysis found that drought-induced high crop prices coupled with above average yields resulted in a profitable year for farmers who participated in the analysis.
Overall, median net farm income (the farm’s contribution to family living expenses, income taxes, retirement and business growth) was up 47 percent from 2011.
The analysis used data from 2,200 participants in MnSCU farm business management education programs and 110 members of the Southwest Minnesota Farm Business Management Association (the total number of farms in Minnesota is approximately 80,000).
In farm business management programs, producers learn how to maintain, interpret and use quality business records to develop business plans, make key decisions and execute marketing plans throughout the year. The producer’s personalized annual whole business and enterprise analyses, which become the “textbooks” used for making business decisions throughout the year, provided the source data for the analysis.
“Agriculture continues to be one of the bright lights in the Minnesota economy. A thriving ag economy is essential for the economic health of rural Minnesota,” said Ron Dvergsten, Dean of Management Education at Northland Community & Technical College in Thief River Falls. “We were not surprised that Minnesota crop producers had a good year. We were surprised at how well livestock farms did, given record high feed costs. Minnesota livestock farmers generally produce a large portion of their own feed, which gives them an advantage in years like this.”
Despite developing drought conditions during the growing season, corn yields improved over 2011 for these Minnesota producers. Corn averaged 170 bushels per acre, slightly higher than the 10-year average of 166 bushels for participating farms. Soybeans yielded 46 bushels per acre compared to a 10-year average of 41. “We started the growing season with very adequate rainfall and the crops were able to go down and find moisture as we dried up later in the season,” said Dale Nordquist, Extension economist in the University of Minnesota Center for Farm Financial Management. “But we are heading into 2013 planting season with a serious lack of soil moisture. We dried up the soil profile by the end of the year.”
Crop prices were also higher than most producers had ever experienced. The average price for corn sales was $6.08 per bushel, compared to $5.17 in 2011 and $3.67 in 2010. Soybeans brought $13.08 per bushel compared to $11.35 and $9.66 the two previous years. Spring wheat sold for $8.18 per bushel compared to $7.24 and $5.03 in the two previous years.
Page 2 of 2 - While crop prices were up, so were production costs. For corn, land rental rates increased by 17 percent. Fertilizer was up 26 percent. The total cost to grow an acre of corn was up $88 an acre from 2011, an increase of 13 percent. Livestock farms were somewhat more profitable than in 2011, but much of this profitability was due to the cropping side of their operations. Milk sold for $19.60 per hundredweight compared to $19.96 in 2011. With a cost of production of $19.19, dairy farmers made 41 cents on every hundred pounds produced.
Market hog prices declined from $66 per hundred pounds in 2011 to $63 in 2012. Market beef prices increased from $113 per hundredweight in 2011 to $122 in 2012. However, the cost to produce 100 pounds of beef increased by $16.
Inflation-adjusted incomes for these Minnesota farms increased to levels that have not been experienced in almost four decades. “We are in the middle of one of those golden ages of agriculture,” Nordquist said. “The last period we had like this was in the 1970’s. Those of us who are old enough remember that period ended with a hard landing. We don’t expect another hard landing, but we know this will end sometime.”
The statewide results are compiled by the Center for Farm Financial Management into the FINBIN database which can be queried at www.finbin.umn.edu.
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