The incomes for Minnesota farms continued to decline in 2015, reaching their lowest point in inflation-adjusted dollars in 20 years, according to a study conducted by University of Minnesota.

A major factor was the continued decline in prices for virtually all major commodities produced by Minnesota farms. Unlike 2014, when livestock producers had a very good year, both crop and livestock farms struggled financially in 2015. 
These are among key findings in the annual farm income analysis conducted jointly by Minnesota State Colleges and Universities (MnSCU) and University of Minnesota Extension. The analysis used data from 2,031 participants in MnSCU farm business management education programs and 103 members of the Southwest Minnesota Farm Business Management Association. Participating producers represent approximately 10 percent of commercial farmers in Minnesota.
Dale Nordquist, University of Minnesota Extension economist, says:  “At current prices, the average crop producer would have suffered a net income loss of over USD 50,000 with normal yields.”
Overall, the median net farm income for Minnesota farmers included in the study was USD 27,078, down 37 per cent from 2014. The median income for crop farms was just over USD 26,500, up from USD 16,500 in 2014 but far less than incomes earned during the “golden years” of 2010 – 2012. The median livestock producer earned just under USD 24,000, down from over USD 110,000 in 2014.  

The median net farm income for the last four years:                      

• Crop farms: USD 26,586 (2015); USD 16,582 (2014); USD 48,120 (2013); and USD 260,940 (2012).
• Livestock farms: USD 23,933 (2015); USD 110,634 (2014); USD 44,755 (2013); and USD 127,626 (2012)

“It is hard to look at these financial returns-and the lack of debt repayment capacity of these farms-and think that this could happen in a year of record yields,” said Ron Dvergsten, a farm business management instructor at Northland Community and Technical College in Thief River Falls.  “Most of these farms still have solid balance sheets, but cash flow and debt repayment capacity is really tight.”

Livestock: Profits of 2014 were short lived

Prices for every major livestock commodity dropped sharply in 2015 after hitting record prices the year before.

• Dairy profits declined sharply after 2014’s record profit year. Dairy farms earned an average profit of USD 41,500, down 70 percent from the previous year but still the highest income earned by any major commodity group in 2015. 
• The average price received for milk decreased 27 percent, from USD 24.45 per hundred pounds in 2014 to USD 17.93. With the average costs of production around USD 17.50, dairy producers netted about USD 300 per cow after expenses compared to USD 1,200 in 2014.

Despite three years of reduced income, the average farm maintained a strong balance sheet.  

However, the outlook for 2016 remains tough. Commodity prices have hit major headwinds, with weak international economies and the strong dollar putting pressure on global demand. 

Conversely, some costs, especially fuel and fertilizer, have come down. Cash rents, the major expense for most crop producers, decreased about 5 percent in 2015 and are expected to go down more in 2016.

While those reductions will help, for many producers the costs of production are still higher than prices currently available for 2016 production.  

“There is a lot of anxiety in rural Minnesota,” said Keith Olander, director of AgCentric at MnSCU.  “We work directly with these producers to try to put together cash flow plans that work and are bankable.  That is a real challenge right now.”