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Some ticks upward in farm income in 2019; uncertainty ahead

Minnesota farm incomes inch higher

Minnesota farmers continued to struggle with low profitability in 2019. Median net farm income was up slightly from the previous year at $36,211, but was still historically low. Each of the past five years has fallen in the bottom third of historical records tracked by University of Minnesota Extension and the Agricultural Centers of Excellence within Minnesota State when adjusted for inflation.

“Farming as a business is far from profitable,” said Keith Olander of the Minnesota State Northern Agricultural Center of Excellence. “Minnesota farmers are in need of a good year.”

Last year, 28 percent of farms lost money, 45 percent lost working capital, and 46 percent did not earn enough to cover scheduled debt payments.

“The average producer did a little better, but inside the numbers there was a lot of diversity,” said Dale Nordquist of the University of Minnesota’s Center for Farm Financial Management. “More than in most years, earnings depended on where you lived, how much it rained and how much your commodities were impacted by trade issues.”

The analysis includes 2,167 participants in Minnesota State Farm Business Management programs and 106 members of the University’s Southwest Farm Business Management Association. Participating farmers represent approximately 10 percent of Minnesota’s commercial farmers.

Crop farms: Too much rain and continued trade issues

The median income for crop farms of $36,600 would have been far worse had it not been for Federal farm programs that provided much needed cash. The Market Facilitation Program (MFP) provided payments to producers of commodities impacted by trade-related losses. MFP payments contributed over 100 percent of net income for a large share of Minnesota crop producers. “It is likely that 20 percent of our producers would not have gotten operating credit for next year’s crop without the MFP payments,” said Ron Dvergsten, farm business management instructor at Northland Community and Technical College in Thief River Falls. “Those payments were critical to keep many of the producers we work with in business.”

Crop yields were below trend in all regions. Spring rains delayed planting and forced producers to choose either planting into extremely poor seed-beds or not planting at all. Many chose to take the prevented planting crop insurance option, providing at least some income in exchange for leaving fields unplanted. Excess rainfall continued into fall harvest. No part of the state was more impacted than the Red River Valley. “There were lots of sugar beets left in the ground last fall and we still have a lot of unharvested corn in the fields,” said Josh Tjosaas, farm business management instructor at the Moorhead office of Northland Community and Technical College. “Add to that the extra costs of harvesting in difficult field conditions, and this spring, our producers will have to deal with those poor field conditions for planting which increases their costs.

Crop prices were mixed. Corn improved at $3.62 per bushel, up from $3.33 in 2018. Soybean prices, more impacted by trade issues, were $8.48 per bushel, down from $9.04 the previous year.

Dairy: A second half rebound was too late for some

Dairy farm losses have been much in the news over the past several years. In 2019, profits for participating dairy farms improved. The median dairy farm earned $64,144 compared to $15,434 in 2018. The average milk price, at $18.81 per hundred pounds, was the highest since record prices in 2014. The number of participating dairy farms decreased by 13 percent, as many producers liquidated their herds after four years of low profits or losses. “2019 is really a tale of halves,” said Nate Converse, farm business management Instructor at the Staples campus of Central Lakes College. The first six months were similar to 2018 with Class 3 prices averaging $15.25. Then in July, Class 3 prices started to rise and finished the year strong. Even with increased profitability, 33 percent of dairy farms had negative debt repayment margins.”

Pork producers: Higher returns but trade issues limit the rebound

Pork producer earnings rebounded with the median producer earning $96,245, up from $27,799. Wean-to-finish producers made $5.00 per head after losing over $8.00 in 2018. Pork operations have been on an earnings roller-coaster for several years, going from very high profits to losses, and then back. Producers expected 2019 to be very profitable, as disease forced China to liquidate more than one million pigs. However, China later imposed high tariffs on pork imports, blunting much of that gain. Hog producers received MFP payments to partially offset these trade-related impacts, as did dairy producers.

Beef producers: Continued very low returns

Beef producers continued to struggle with low profits. Median net farm income for beef producers was just under $7,000, up from just $4,000 in 2018. Beef cow-calf producers lost over $140 per cow. Cattle finishers made just over $10 per head, meaning the average producer who finished 305 head made only $3,000. In order to generate a living for the family, many beef producers have off-farm sources of income. The average family included in the beef farms earned over $42,000 from non-farm sources.

Prospects for 2020

USDA forecasts net farm income to be up slightly in 2020. Higher receipts are forecast for hog, dairy, beef and poultry producers. Crop receipts are forecast to remain unchanged while government payments are expected to decline. Minnesota producers face many unknowns. Will saturated soils dry in time for spring planting? Will trade agreements improve export markets? If not, will there be continued government support? Will higher milk prices hold?

One thing seems clear – 2020 will be anything but a normal year for Minnesota farmers.

Allison Sandve, Extension news media manager, ajsandve@umn.edu, 612-626-4077 (office) or 651-492-0811 (mobile).
Contact Extension Communications at extnews@umn.edu.

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