Farm income in Minnesota fell 8 percent last year, worst year since early 1980s

The trade war and bad spring weather hit Minnesota farmers while they were already down in 2018, leaving them with their least profitable year in three decades.

Median farm income in 2018 was $26,055, down 8 percent from 2017, capping off a half-decade run of poor years for farming after the boom of the early 2010s, according to a new report from the University of Minnesota Extension.

"The previous five years were not much better, so many Minnesota farms have had a string of low-income years," said Dale Nordquist of the Center for Farm Financial Management at the University of Minnesota. "There's an awful lot of not only financial stress but emotional stress for the farms that are struggling."

Profitability varied by type of farm — beef and dairy farmers were worse off and crop farmers were better off — but overall 2018 was the worst year for farmers in Minnesota since the Farm Crisis in the early 1980s.

Farmers are struggling on several fronts. Dairy farmers are wrestling with overproduction, plummeting prices and widespread consolidation.

The median income at a dairy farm in Minnesota dropped by nearly two-thirds last year, from $43,000 to less than $15,000. The U surveyed about 2,300 farmers, representing 10 percent of Minnesota's commercial farmers. Enough dairies are closing that the number of dairy farms who participated in the U's research dropped by 15 percent.

"It has been a real struggle for many of our dairy farms," said Nate Converse, Central Lakes College farm business management instructor. "Dairy farmers work really hard and to see low earnings and, in a lot of cases losses, year after year has worn on them and their families. As a result, many of them have decided they can't wait for things to turn around."

The trade war with China also has taken a toll as soybean prices fell at the onset. Minnesotans, who mostly grow their crop for export to China, have been hit harder than soybean farmers in other parts of the country.

"It could have been a lot worse," said Aaron Brudelie, a Minnesota West Community and Technical College farm business instructor.

The Market Facilitation Program, which gave federal payments to farmers of $1.65 per bushel to help offset the effects of the trade war, "was the main reason soybean producers showed any profits this year," Brudelie said.

Pork prices were down 9 percent in 2018, largely because of the trade war. The average hog finisher, a farmer who prepares pigs to send to the slaughterhouse, lost $11.50 per pig.

The weather worked against farmers too. Corn yields were down 20 percent across southern Minnesota in 2018 thanks to a wet spring and delayed planting.

And some farmers worry that the same thing will happen in 2019. Flooding on the southern Mississippi has already squeezed commodity shipping on barges and driven down regional prices for grain.

"It's important to understand that these are small businesses that don't pay themselves a salary, so that net farm income reflects what they made from the farm to feed their families," said Nordquist, who is an extension ag economist.

The news, however, is not all grim. The average farm's debt-to-asset ratio increased slightly to 36 percent, but that's still a relatively strong financial position supported by farmland that has maintained its value. Until more farmers are mired in deeper debt, fears of widespread bankruptcy may be overblown.

The top 20 percent of farms in Minnesota posted average income of $184,000.

"There are still a lot of farms out there that are successful," said Josh Tjosaas, Northland Community and Technical College farm business management instructor. "And it is not just larger farms that are profiting. We work with profitable farms of all sizes and types. But in this environment, it takes outstanding management in all phases of the operation, good timing and, maybe, a little luck to make that happen."

But 34 percent of farmers in Minnesota lost money in 2018, 40 percent lost net worth, and 53 percent lost working capital.

The USDA projects somewhat higher profits for agriculture in 2019, but Nordquist said it's too early to say.

"On the crop side, costs are projected to be higher and there is no relief yet on prices, so it is a little hard to see where that increase might come from," Nordquist said. "Hopefully, we will see some improved profitability in dairy and livestock agriculture."