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A dramatic drop: Farm incomes dropped in 2013

Ed Keil, who crop farms north of Perham, is one of many Minnesota farmers who saw a drop in revenues last year compared to the year before. Experts say that’s partly due to the big year most farmers had in 2012. Elizabeth Huwe/FOCUS

All around Minnesota, 2013 earned very little affection from livestock and crop farmers.

Compared to the year before, with its early spring and more cooperative weather, last growing season was a letdown. From a winter that wouldn’t end to a long summer drought, nothing seemed to go quite right.

“In 2012, we were in the fields the last week of March,” said Ed Keil, who has been crop farming north of Perham for the last seven years. “In 2013, it was the first week of May before we got in… Now, we’re kind of headed for that this year, too, with the snow coming.”

Even crop prices took a dive.

“It was a big change,”Keil said. “Everybody went from planning on $7 (per bushel) corn to $3.50 or $4.”

As corn prices declined in fall 2013, so did incomes for a majority of Minnesota farms, according to a joint study released in March by the University of Minnesota Extension and Minnesota State Colleges and Universities.

Overall, the study found that net farm income was $41,899 for an average farm in Minnesota. That’s in comparison to $189,679 in 2012, a 78 percent decrease.

Crop farm incomes plummeted due to declining commodity prices. Livestock farms did not fare much better as incomes for dairy, hog and beef operations also declined.

 “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 with the University of Minnesota Center for Farm Financial Management.  “2012 was a very profitable year for Minnesota farms.”

When asked if he had based his plan for 2013 on the prices and favorable weather in 2012, Keil said yes.

“I think a lot of people did,” he added. “It was a big shock to everybody to see it (the price) drop out just about by half.”

Corn and soybean prices dropped dramatically over the year.  On average, farmers lost $24 on each acre of corn, whereas, in 2012, acres produced a net return of $377. Soybeans went from $216 net return per acre in 2012 to $85 in 2013.

When seed needs to be ordered in advance, during a high demand time, the lag between planting and harvest can really make for a mess.

“You’ve got the high inputs that were kind of related to the high costs, and then, all of a sudden, you come in with the low prices (at market),” said Keil as to the difference.

Crop yields were also down due to the cold, wet spring followed by developing drought conditions in parts of the state. The drought then cost farmers more: either in lost production or through the cost of additional irrigation.

“I only had a couple of acres of dry-land corn,” said Keil.

His irrigated corn produced 180 bushels per acre, and what grew on dry land was closer to 20.

For Keil, soybean prices didn’t fall quite as drastically as the report’s averages. However, he said, that is partially because he grows food-grade soybeans that fetch a premium price.

“It’s not like I got 2012 prices,” he said, but he remembers other years which have been worse.

The study found that livestock farms also faced high costs for much of the year; feed prices did not decline substantially until harvest. Prices for milk, pork and beef were all up from the previous year, but the combination of high feed costs and lower values of feed inventories reduced livestock farm profits.

Milk sold for $20.34 per hundredweight compared to $19.63 in 2012, according to the study. After the cost of production, dairy farmers made 42 cents on every hundred pounds of milk produced.

Bob Dombeck has farmed near Perham for years. He grew up on his family’s dairy farm, where they also raise feed crops and kidney beans.

He said his milk prices were “kind of low, but not as bad as in the past.”

When their corn didn’t reach full maturity before harvest, and the alfalfa didn’t produce a good crop, Dombeck said they began to see a difference in the milk produced by the cows. Feed quality affects milk quality.

Despite the challenges for a lot of other crops, Dombeck said their kidney beans had “one of the best crops in years.”

“Kidneys like cooler weather,” he said, and no big storms caused damage while the beans were flowering.

Since the beginning of the year, milk prices have gone up, Dombeck said. February and March were at record highs.

“Everything looks pretty optimistic right now,” he said. “That is, as long as we can get in the field at a decent time this year.”