Minnesota farmers did well financially in 2007
By Janet Kubat Willette
Last year was a good one for most farmers across Minnesota.
The average net farm income increased by 70 percent in southeast Minnesota to $151,978. It was nearly double the previous year at $158,714 in central and west central Minnesota. In south central and southwest Minnesota, average 2007 net farm income was $149,940, which is 40.2 percent higher than 2006.
In north central and northwestern Minnesota, average net farm income increased from $39,556 in 2006 to $111,015 in 2007.
Jim Molenaar, regional dean of management education for Ridgewater College, put the numbers in perspective.
If adjusted for real dollars, 1973 was still a much better year, Molenaar said. Net farm income would need to be over $200,000 to match that year’s income. Using the Consumer Price Index for adjustment, today’s soybeans would need to sell at $30 a bushel and corn would need to be over $12 a bushel to match 1973 prices.
Many people in the agricultural sector are talking about high farm income and escalating expenses, said Kevin Klair, an Extension economist with the Center for Farm Financial Management. Farmers’ incomes are historically high, but their input costs are also historically high, he said.
"We’re making money in agriculture, but the risk is really high," he said.
If corn and soybean prices fall to previous pricing levels, the impacts would be serious.
Farmers are getting to where they are carrying more debt because input costs are going up and they are pricing and buying ahead to take advantage of cost savings. Farmers may already be buying inputs for the 2009 crop before having sold their 2007 crop or planted their 2008 crop. Managing three crop years at once is a real change from just a few years ago, Klair said.
"Farmers are more nervous with these higher prices and these higher inputs than they were three years ago," said Ron Dvergsten, dean of management education at Northland Community and Technical College.
In the last two years in particular, Dvergsten said, farmers are putting the pencil to paper to figure out their cost of production, taking their inputs on a per acre basis and their expected yield per acre into account. They’re evaluating different scenarios to see if it’s better to raise corn or to joint venture on a sugar beet share, for example.
"I think that financial management in good times is at least as critical as financial management in stressful times," Klair said.