Minnesota farmers had most profitable year since 2012, extension data confirm

Minnesota farmers in 2020 had their most profitable year in nearly a decade due to good weather and aid designed to offset health and trade crises.

Median farm net income rose to $106,969 last year following seven years of low profitability, according to a report published Tuesday by the University of Minnesota Extension and the Minnesota State Agricultural Centers of Excellence.

The Minnesota farm-income report showed that 2020 produced surprising results after what looked last spring like another disappointing year.

Rising commodity prices at the end of 2020 and two rounds of government aid tied to COVID-19 relief assisted many sectors, including agriculture. Economists called the year "a sigh of relief," though they were measured in assessing impact because of the volatility of farming.

Without government aid, Minnesota farmers would have experienced an eighth straight year of low profitability, said Pauline Van Nurden of the University of Minnesota's Center for Farm Financial Management. From 2013 to 2019, the state's median annual farm profit hovered between $26,940 and $42,754.

"Farms did have a successful year last year — a profitable year — given all of the challenges of the pandemic," Van Nurden said. "It was the first year in eight years that they've really seen strong profits. It's been a pretty long downturn up until now."

As the pandemic bore down on America in early 2020, food-processing facilities became one of the first transmission hot spots, with many of them closing temporarily to get the health crisis under control. Laborers fell ill and workloads became more staggered, resulting in a production slowdown.

This led to a backlog of farm inventories as growers and producers had fewer places to send their grains and animals.

At one point in late spring, 10,000 hogs were being euthanized daily in Minnesota, along with chickens and turkeys to varying degrees. Dairy farmers were dumping milk as their institutional buyers that serve schools, restaurants and cafeterias no longer needed bulk supplies.

There was a surge in demand for food at retail stores, but it took time for the nation's food system — including the farmers supplying the goods — to adjust to this shift in demand.

But, fortunately, Minnesota had a good weather year overall while competitor regions, such as South America, didn't fare as well. Even neighboring states battled severe weather events, like the August derecho storm that leveled crop fields, silos and farm structures in Iowa.

Meanwhile, Minnesota went from one of its most "uncooperative weather" years in 2019 to one of its best in 2020, said Kevin Paap, president of the Minnesota Farm Bureau. "It gave us, quite frankly, tremendous yields."

Minnesota livestock farmers had their own issues, but a depressed global hog supply due to the ongoing African swine fever and the spring culling of animals eventually led to higher farm prices that increased year-end profits.

"The mood [among Minnesota farmers] is much more optimistic than it was a year ago," Paap said. "We've got some of those dollars to help manage long-term debt and reinvest into the farm."

The report is based on information from 2,375 farms across the state. Every farm type, including dairy, tracked by this report experienced positive net farm income last year.

"There still were some pretty tough situations out there with our lowest-profit farms, but in general farms did well and that was a much needed reprieve," Van Nurden said.

Government support, particularly early on, played a key role in farm finances last year. It accounted for 12% of gross farm income, or revenue, for the average producer. While some of those payments were directly related to COVID-19 setbacks, several were for natural disasters experienced in 2018 and 2019 as well to cover trade retaliation and tariffs.

"Farmers would always rather earn our income from the marketplace than the government," Paap said, "But that was the lifeline to keep many of us going early on [in the year]."