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Farm income takes a big hit

Corn was very good to area farmers in 2012 but was one reason farm incomes tanked last year. Graphic by Sara Leitheiser/DL NEWSPAPERS1 / 2
The Audubon Elevator during the bumper corn harvest of 2012. DL NEWSPAPERS/Paula Quam2 / 2

Net farm income plummeted in Minnesota last year, after banner profits in 2012.

A steep fall in corn prices was largely to blame, according to a joint analysis conducted by Minnesota State Colleges and Universities and University of Minnesota Extension.

Overall, net farm income was $41,899 for the median farm. That compares to $189,679 in 2012, a 78 percent decrease.

Bill Zurn, who farms near Callaway, said last year was not a good one for area farmers — especially sugarbeet farmers — but he said the drop in income looks especially steep because 2012 was such a great year for Minnesota farmers. “2012 was one of the years we’re going to look back on,” he said. “It was exceptional.”

While crop farm incomes plummeted in Minnesota due to declining commodity prices, livestock farms did not fare much better — incomes for dairy, hog and beef farms also declined.

The analysis 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 working with private consultants.

“A decline from 2012 levels should not come as a big surprise. We have to remember where we came from,” said Dale Nordquist, Extension economist in the University of Minnesota Center for Farm Financial Management. “2012 was a very profitable year for Minnesota farms. Land rental rates have been catching up with the increased profitability of crop production. Most crop producers were in pretty good shape to handle a down year.  The question is how long will these reduced profits last?”

At least at this point, things aren’t looking much better for sugarbeet revenue.

The price of sugar beets dropped from $65 a ton to $35 last year.

“Take your paycheck from 2012 and cut it in half – that’s what it was like,” said Zurn, who grows sugarbeets along with other crops. 

Sugar beet producers lost an average of $300 per acre in the Red River Valley and west central Minnesota.

Zurn is bracing to take a loss on sugarbeets again this year. Area producers are locked into five-year contracts with Crystal Sugar Cooperative of Moorhead and have to take the bad with the good.

“It happens to be an ugly time right now,” but he has lost money on crops in the past and will fulfill his contractual obligations to Crystal Sugar, Zurn said.

“Everybody in the crop-raising arena has certainly been affected,” said Audubon farmer Bruce Hein. “It’s a simple issue — crop prices have gone way down, so crop farmers’ incomes are way down.”

There are really only two possible ways that this situation will improve, Hein added: “Either crop prices will have to come up again, which I think is kind of unlikely, or farmers are going to have to find ways of reducing their costs.”

But so much of those costs are out of farmers’ hands, Hein added.

“You need certain inputs, like fuel and fertilizers, that you have to buy,” he said. And while the prices for these things are also affected by lower grain prices, that effect takes time to be felt locally.

Also, he said, railroad companies are allocating more and more of their available rail space to fuel cars shipping product from North Dakota’s “oil patch,” which leaves far fewer cars available for grain hauling.

“The cars just aren’t available, and the rates for the cars that are there is extremely high, so it’s really kind of a double whammy for farmers,” Hein said. “The railroad has a monopoly on moving large volumes of freight, and it’s more profitable to move fuel than grain right now. That’s the crux of the issue.”

Corn and soybean prices dropped dramatically in 2013. Net return per acre of corn dropped from $377 in 2012 to minus $24 in 2013. Soybeans went from $216 net return per acre in 2012 to $85 in 2013.

Yields were also down due to a cold, wet spring followed by developing drought conditions in parts of the state.

All in all, times are tough right now for farmers in the area. “They won’t be selling a lot of new paint around here,” Zurn said. But the agricultural community will get through it, he added.

(DL Newspapers reporter Vicki Gerdes contributed to this story)