Strong prices and lower costs brought record profits to many Minnesota livestock farmers in 2014, while crop producers saw earnings deteriorate for the second consecutive year.
Those were among key findings in the annual farm income analysis conducted jointly by Minnesota State Colleges and Universities (MnSCU) and University of Minnesota Extension. Researchers pointed to signals that both livestock and crop producers, however, will face tougher times this year.
Overall, the median net farm income for farmers in the study was $43,129, up 3 percent from 2013 but substantially lower than 2012's record profits.
Net farm income includes the farm's contribution to family living expenses, income taxes, retirement and business growth.
"These farms are businesses that need to earn a return on their investment as well as feed their families from these funds," said Keith Olander, director of AgCentric, a MnSCU Center of Excellence in Agriculture.
The median income for crop farms was $17,003, down from $48,120 in 2013 and $260,940 in 2012, when drought impacted many states but not Minnesota. Prices for Minnesota's primary crops were generally below cost of production in 2014, following several years in which farms benefited from increased commodity prices.
"Minnesota crop and livestock farms have been on different paths for several years now," said Dale Nordquist, Extension economist.
2014 was the best year ever for many livestock farmers, with median income at $138,037, compared to $97,669 in 2012 and $38,479 in 2013. Livestock producers, who struggled with high feed costs and low prices over the past few years, benefited from lower feed costs as corn and soybean prices fell. Plus, meat and milk prices hit all-time highs in 2014.
Crops: Prices and yields fall
Most of the attention in farm country has been on declining crop prices in the past year.
- The average price received for corn sold by participating producers declined from $6.28 per bushel in 2013 to $4.37 in 2014. With costs of production averaging $4.57, the average corn producer lost money on each bushel of corn produced.
- Sugar beet producers in the Red River Valley and West Central Minnesota did not fare any better. In 2012, the average value of beets was $64 per ton. By 2014, it had fallen to $35 per ton. The average producer lost $230 on beets in 2014.
- Soybeans sold for $11.67 per bushel, down from $13.59 the previous year.
- Wheat sold for $6.33 per bushel compared to $7.66 in 2013.
In much of the Corn Belt, record crop yields compensated some for decreasing prices. In Minnesota, though the average yield for farms in the study was 158 bushels per acre, down 9 bushels from their 10-year average.
"The growing season didn't do any favors for Minnesota farmers. Most Minnesotans remember how cold and wet last May and June were," Nordquist said. "That got the corn crop off to a really slow start and we never totally recovered. There is no bright light at the end of the tunnel for most crop producers, either. Things could change but at current prices, most crop farmers will struggle to get their costs of production out of the market this year."
A possible bright spot?
"Sugar beet producers have really struggled for the past two years due to reduced prices mostly caused by excessive amounts of foreign sugar coming into the United States," said Ron Dvergsten, Northwest region program coordinator for the Farm Business Management program at MnSCU. "It does look like the trade issues will be resolved in the near future and should provide for higher sugar prices in 2015."
Livestock: Record profits appear short-lived
The story was much better for beef, pork and milk producers. As crop prices declined over the past two years, so have feed prices. At the same time, prices for meat and milk increased dramatically. The average price received for milk increased from $20.36 per hundred pounds in 2013 to $24.42. With the average cost of production around $20.00, dairy producers netted about $1,200 per cow compared to $300 in 2013.
Beef and pork producers experienced much the same results. The price of market weight beef increased from $1.25 per pound in 2013 to $1.51 in 2014. Lean pork prices increased from 89 cents per pound to $1.01.
"Beef supplies are still struggling to recover from the 2012 drought so beef prices look to remain strong for at least another year," Nordquist said. "But 2015 does not look like it's going to be kind to dairy and pork producers. Milk prices have already declined below the cost of production and futures prices for pork are much lower for coming months."