Minnesota farmers saw thin profits in 2017 for the fifth consecutive year, with one-third of them losing net worth and median farm income down again compared with 2016.
“There is a lot of slow bleeding going on out there,” said University of Minnesota Extension economist Dale Nordquist, who worked on the latest analysis of farm finances. “It becomes a crisis for some individual farms who don’t have a strong enough balance sheet to withstand this extended downturn.”
The marginal profits don’t come as a surprise, since bumper crops in the U.S. and other countries have created an oversupply of grain that has kept prices depressed for several years.
Minnesota farmers have been able to weather the down cycle in part with record profits they earned between 2010 and 2012, Nordquist said. Every farm has a different cost structure, though, and some are doing better than others.
Median farm income in the state has remained between $27,000 and $42,000 annually since 2013.
“If we see profitability in the $20- to $30,000 area, farms aren’t generating enough income to feed a family and have the standard of living that we hope they would be able to have,” Nordquist said.
Net income is the amount from farm operations that covers family living expenses, taxes, reinvestments in the business and retirement. The median is the level at which half of the farm incomes are higher and half are lower, and is considered a good measure to gauge financial trends at the state or regional level.
The lackluster economy has affected nearly all sectors of Minnesota agriculture, according to the report.
Net median income for crop growers dropped by half between 2016 and 2017 to about $24,000, despite near-record yields.
“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 for Minnesota West Community and Technical College.
On the brighter side, prices have improved slightly in the past few weeks because of weather and production problems in South America, he said.
Yet corn prices received by Minnesota farmers in 2017 were below the cost of production for many, according to the analysis, and farmers who rented land lost an average of $25 per acre of corn.
“It’s starting to really hurt,” said Bob Worth, who grows corn, soybeans and spring wheat in Lincoln County in southwestern Minnesota. “Everyone is just hoping to break even.”
Worth said even veteran farmers like him without debt have lost much of their working capital during the past five years, and some have mortgaged their land again to continue operating. Some can no longer make it financially, he said, and psychological depression is a growing problem.
“Every year this takes another set of farmers away from farming,” Worth said. “As we keep moving forward if things don’t change, we could actually see a bigger farm crisis.”
The Extension’s analysis is done each year using data from more than 2,200 farmers who participate in farm business management programs run by Minnesota State and an association in southwest Minnesota. They represent about 10 percent of the commercial farmers in Minnesota.
The report said that soybeans contributed $28 per acre to farm profits last year, although producers are nervous about whether they will lose their largest export customer in 2018 if China imposes retaliatory tariffs on the grain because of President Donald Trump’s new tariff program.
It also reported mixed results for livestock producers, whose median earnings were $32,800 in 2017.
Dairy farmers had a positive start but are now the most financially stressed group of farmers across the state, the report said.
Last year “was really a tale of two halves,” said Nate Converse, farm business management instructor at Central Lakes College in Staples, Minn. “For the first six months, [dairy] had relatively profitable prices, but the bottom fell out in the second half.”
Pork producers were the most successful group financially in 2017, with median earnings just over $122,000 after losing almost $5,000 in 2016.
Kent Olson, associate dean at the Extension center for community vitality, said the continued low income levels are not good news for implement and car dealers or other small-town businesses. But he also said that Main Street has adjusted to the downturn and is waiting for better times.
“Most rural towns have a diverse set of incomes and businesses so as a community they’re able to weather news like this fairly well,” Olson said. “They’ve been doing it for four years prior to this.”