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What does it take to earn a living on the farm?

By Jerrold Tesmer

Mon, May 7th, 2012
Posted in All Agriculture

Each year when the adult farm management data becomes available, Gary A. Hachfeld, Extension Educator for Ag Business Management, University of Minnesota Extension, updates the statistics. It is designed to let non-farm (and some farm) folks know what amount of land or the number of head of livestock it takes to earn a living from the farm. There are some surprising numbers in the document.

Agriculture is an integral part of Minnesota’s economy. Collectively the production, processing, marketing, and distribution of agricultural products accounts for approximately $16 billion dollars of state revenue. Minnesota is the seventh largest agricultural producer overall in the US. Over 40,000 jobs are directly or indirectly associated with agriculture in Minnesota. Surprisingly, only 19 percent of all agricultural employment is at the farm or production level. All other agricultural employment is in processing, marketing, ag services whole sale and retail trade.

As input costs increase and commodity prices farmers receive fluctuate, profit margins change over time. As these changes occur, farmers have had to change their businesses. Some farmers have gone out of business. Some are farming part-time and work off the farm to supplement their income. Others have gone to alternative farming methods in order to remain in farming. Yet others still farm full-time and they have increased the size of their farms or looked to alternative enterprises in order to remain profitable. Whether we agree or disagree with these changes, the changes are a function of the changing agricultural industry.

The following data is presented not to justify or support the changes in agriculture. Rather, it is put forth as one approach to quantifying and explaining what is happening. The numbers presented are real numbers from several hundred real farm families throughout the southern one-third of Minnesota. These families have kept records on their farm business as well as their household and personal expenses. As you study the data, it becomes clear that agriculture is changing. Appearing in the data are more negative returns for enterprises reflecting very slim or negative profits.

Note: The data listed is an average of all the farm families reporting. Keep in mind that there are farm families performing above as well as below the numbers shown here.

In 2011, a total of 343 of the 1,207 farm families from the MnSCU South Central/Minnesota West/Riverland Adult Farm Business Management Program kept household and personal expense records. Their average household and personal expense for the year was $96,315 with an average family size of 3.0 persons.

This MnSCU Adult Farm Business Management Program data includes farm business numbers from farm families in 36 southern Minnesota counties. Calculations include actual numbers reported by farm families.

The chart below illustrates how many acres of crop or number of livestock units needed to earn the 2011 average family living amount of $96,315. The calculations are based upon five year average net return values for the crop and livestock enterprises listed. The net return values are dollars remaining after all farm expenses are paid, excluding a charge for labor and management. The numbers are an average of all farm records included in the MnSCU South Central/Minnesota West Adult Farm Business Management Program for the 2007-11 years. Also, there are three assumptions related to the calculations. The first assumption is that all income to earn the family living amount would come from one enterprise. The second assumption is that all family living income would come from the farm and there is no off-farm income included in the calculation. The third assumption is that the net return values for corn, soybeans, and alfalfa hay are for cash rented land (most producers rent more land than they own) and the crop values include government payments where applicable but do not include a charge for labor and management.

Enterprise 5 Yr. Ave. Net Return Units Required To Earn Living

•Corn/Ac. (incl. govt. payments) $ 185.44: 519 Acres

•Soybeans/Ac. (incl. govt. pmts.) $ 144.00: 669 Acres

Note: If a farmer plants a 50/50 corn and soybean rotation, here is the approximate number of acres required to meet family living expenses. Using the net return numbers and the 2011 family living cost of $96,315, a farmer would have to have approximately 292 acres of corn and 292 acres of soybeans or a total of 584 acres to earn the family living amount.

•Alfalfa Hay/Acre $ 224.41: 429 Acres

•Farrow to Finish Hogs/Head -$ 1.54: ? ? ? Head

•Hogs, Weaning to Finish/Head -$ 7.82: ? ? ? Head

•Finish Feeder Pigs/Head -$ .34: ? ? ? Head

•Contract Finish Hogs/Head $ 6.48: 14,863 Head

•Beef Finish Calves/Head.

$ 77.27: 1,246 Head

Dairy Steer Finishing -$ 8.48 ? ? ? Head

•Beef Cow-Calf/Cow -$ 15.68:

? ? ? Cows

•Dairy Cows/Cow $ 375.24: 257 Cows

If you would like the complete document please contact me at tesme001@umn.edu or call the Houston County Extension Office 507-725-5807 or the Fillmore County Extension Office 507-765-3896.

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