Minnesota livestock producers had one of their best years ever in 2014, but crop farmers struggled with the lowest incomes in several years.
Livestock farmers chalked up median incomes of $138,037, compared with $97,669 in 2012 and $38,479 in 2013, according to an analysis released Wednesday by the Minnesota State Colleges and Universities and the University of Minnesota Extension. The beef, pork and dairy farmers benefited from lower feed costs as corn and soybean prices fell, and meat and milk prices hit all-time highs in 2014.
Crop farmers, however, saw income drop for the second consecutive year, with median incomes of $17,003, compared with $48,120 in 2013 and $260,940 in 2012, when drought affected many other states and prices skyrocketed.
Extension economist Dale Nordquist said the income numbers represent a full analysis of confidential financial records for more than 2,100 farmers that are compiled in a database.
"Median income means what they earned after they've paid their expenses," he said. "It's what they have left over for family living expenses, taxes and any growth."
This year also will be troublesome for both livestock and crop farmers, Nordquist said. Hog and milk prices have dropped significantly in recent months, he said, so 2015 could be tight for all farmers.
"Things could change but at current prices, most crop farmers will struggle to get their costs of production out of the market this year," he said.
Weather didn't help
Part of the problem for crop farmers in 2014 was cold and wet weather last May and June that got crops off to a late start and reduced yields, he said.
"We didn't have a great crop production year, and when other states are driving the price down by producing bumper crops, it makes for a pretty tough year," Nordquist said.
The average price for corn sold by the farmers in the study was $4.37 per bushel in 2014, with costs of production averaging $4.57 per bushel.
Bruce Peterson, a Northfield farmer and president of the Minnesota Corn Growers Association, was not surprised at the findings.
"Low profits are the result of two poor crop years in a row in our state," he said. "Hopefully in 2015, we'll get better planting conditions and get the crop in the ground earlier, which at least gives us a chance at better yields."
Peterson said that farmers with both crops and livestock did better financially than those who only grow corn and soybeans. And he said the most vulnerable producers are newer and younger crop farmers who haven't had enough time to build much equity.
The downturn in crop prices and farmer income has already affected the state's economy, Peterson said, since many farmers have stopped buying and upgrading equipment.
"They're trying to cut back in any way they can without hurting yields," he said.
Tougher year ahead
Minnesota ranks second in the nation after Iowa in the value of pigs produced, and David Preisler, executive director of the Minnesota Pork Producers Association, said he wasn't surprised by the high prices for bacon, ham and other pork products in 2014. The industry weathered an epidemic pig virus that killed millions of newborn pigs in the winter of 2013-14, he said, reducing the amount of pork available and increasing consumer prices in the middle two quarters of 2014.
Disease incidence dropped to a small fraction of that this winter, he said, thanks to intensive management and biosecurity plans.
"Consequently, we have about 7 percent more pork in the market now than what we did a year ago, so prices are back down both at the farm level and for consumers," he said.
Preisler said another factor has been reduced export sales, both because of a labor slowdown at ports on the West Coast and a strong U.S. dollar.
"Right now, if you look at where the futures market is for pigs and for grain, which is our largest input cost, if we look the next 12 months it's kind of break-even at best," he said. "Not necessarily losing money but not making money either."
Some will rethink strategies
Wells Fargo agricultural economist Michael Swanson said that the farm income numbers confirm what he and other bankers have seen when renewing lines of credit for farmers: some of them need to be more careful with what they buy, how much they pay and when they sell.
Farmers in the same county raising the same crops on the same sized farms "differ wildly" in how much money they make or lose, he said. "Whether they sold their corn and beans early, whether they were a little bit more disciplined in the cash rents and some of the purchases, they're night and day apart in terms of their financial results," Swanson said.
Swanson said he suspects that the university's results will be similar to what the bank has noticed. "The spread between doing well and doing poorly has gotten even wider for 2014," he said.
Nordquist said the study confirms that farmers had several good years up until last year, with record profits in crops for 2012 and plenty of working capital to draw from.
"The financial position of those farms is still solid, for the most part," he said. "But it's probably tough after those profitable years to be using up that capital so fast."