MINNEAPOLIS -- Lower corn prices fueled a dramatic 78 percent drop in Minnesota farm income last year, according to an annual report released Thursday by the Minnesota State Colleges and Universities system and University of Minnesota Extension.
Net farm income was $41,899 for the median farm in the study, compared with $189,679 in 2012. Livestock farms did not fare much better, as incomes for dairy, hog and beef operations also declined in 2013.
While the authors said they expect another down year for crop farmers in 2014, they expect a much better year for livestock producers who are already catching a break from lower feed costs and higher meat prices.
Extension economist Dale Nordquist said the big question is how long the lower profits for crops will last.
The huge drop in overall farm income was not a surprise, he said, given that 2012 was an unusually profitable year for Minnesota crop farmers, who largely escaped a widespread drought and benefited from the resulting high prices. Most farmers still had enough cash on hand so they didn't feel the full impact in 2013, but it'll hit harder this year when they sell off the rest of last year's crops, he said.
"It's not pretty," Nordquist said. "For a lot of farmers it's certainly not a crisis. They did come in with great working capital. It's just a matter of this year they're going to have to use up some of that working capital to make up for losses in production."
Minnesota's net return per acre of corn fell from a $377 profit in 2012 to a loss of $24 in 2013, the report said. Soybeans returned a profit of $85 per acre compared with $216 in 2012. And sugar beet producers lost an average of $300 per acre as the price dropped from $65 a ton to $35.
Other factors putting the squeeze on profits included rising land rents and other production costs, Nordquist said, as well as and a cold, wet spring followed by drought that led to below-average yields.
"At current prices, many producers will lose money on cash-rented land in the coming year," Ron Dvergsten, coordinator of the farm business management program at Northland Community & Technical College in Thief River Falls, said in the report.
While rents and other costs are projected to increase in 2014, he said, one plus is that fertilizer prices are down.
Even with strong prices for meat and milk, Nordquist said, livestock producers struggled through most of last year because of high feed and forage costs that didn't come down until the harvest.
"But now coming into 2014, it looks like a really strong year for livestock producers," Nordquist said.
Prices for meat and dairy products keep rising. In fact, he said, livestock farmers are starting to worry that consumers will start shying away because of the high prices they're now seeing in grocery stores. Government figures show beef prices jumped 4 percent in February alone because of the western drought, the most in more than 10 years, while milk and other dairy prices also rose.
One wild card for Minnesota's pork producers is the porcine epidemic diarrhea virus, he said. It's deadly to newborn piglets so it can be a disaster for farms stricken by it. The virus showed up in the U.S. last spring and has been spreading rapidly in several states including Minnesota.
The study used data from 2,063 participants in MnSCU farm business management education programs, 111 members of the Southwest Minnesota Farm Business Management Association and 41 participants who worked with private consultants.
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Online:
Annual report: http://bit.ly/1fpCVvP
FINBIN Farm Financial Database: http://bit.ly/1gvRand
