State Executive Summary - 2018

Farm Business Management Program Database

(2209 Farms)

State Executive Summary - 2018

Financial Summaries & Financial Standards for 2015-2018 Current year data by Region, Farm Type, & Years Farming

April, 2019

Average Money Spent by each Farm totals

$860,696

Fuel & Repairs, $72,196

Other Farm Expense, $117,593

Capital Purchases, $134,291

Interest & Leases, $151,677

Direct Livestock Expenses, $133,680

Family Living, Inv. & Taxes, $79,897

Direct Crop Expenses, $171,362

In Cooperation with the Center for Farm Financial Management, University of Minnesota Compiled by Josh Tjosaas and DelRay Lecy

Contact: Keith Olander @ Keith.Olander@clcmn or Brad Schloesser @ Brad.Schloesser@southcentral.edu Farm Business Management Websites at: or

Brief Overview of 2018 in Production Agriculture

Farm Business Management Program Database

Minnesota farmers experienced their sixth consecutive year of low profitability in 2018. This is one of the key findings in the annual report developed by the Minnesota State Farm Business Management Education program (FBM) in cooperation with the University of Minnesota. The data in this report comes from 2,209 farmers participating in the Minnesota State FBM program.

Based on the graphic on the cover, over a 40 year farming career, each farmer would spend $34,427,840. Based on that same graphic, those 2209 farms spent $1,901,277,464 in their greater communities in 2018. The majority of this money is spent locally, including businesses and cooperatives; demonstrating the vital importance of farms on the economy of Minnesota.

The median farm earned $24,817, down slightly from $26,556 in 2017. Declines in farm income were largely driven by low profits and losses for cash crop farms on a regional basis along with lower profits on a wide variety of livestock farms throughout the state. With average investment just under $3 million, farms earned a 1.8% return on investment. Across all farms types, almost one third of farms lost net worth in 2018.

For the third consecutive year, many Minnesota farmers produced bumper crops of Minnesota's primary cash crops, corn and soybeans, while others struggled to get average yields due to various weather challenges. Similar to the two previous years, high yields did not produce high profits. The median crop farm earned $29,712, up from the $21,920 in 2017, while still lower than the $43,705 earned in 2016.

Profits were down significantly for each of Minnesota's major types of livestock operations: dairy, pork and beef. The median livestock producer earned only $10,350 from farm operations for the year, compared to $47,902 in 2017. All livestock producers were at low levels of income by historical standards.

Most Minnesota farmers are still in reasonably good shape financially, even after six years of low earnings. The average farm's debt to asset ratio was 48% in 2018, an increase of 2 percent from 2017. Working Capital has declined since 2012 to a 6 year low of $180,805.

What is Net Farm Income used for?

Net Farm Income dollars are used to pay for Family Living, Social Security and Income Tax, Retirement Accounts, Medical and Health expenses, and loan principal payments. The list below shows the data for the current year. A positive balance indicates that there is revenue available for other uses, while a negative balance indicates there is a need for revenue from other sources.

Net Farm Income Depreciation Family Living (Excl Health/Med) Social Security and Income Tax Health and Medical Expense Retirement Accounts Principal Payments

(plus) (minus) (minus) (minus) (minus) (minus)

2018 $49,068 $49,692 $45,702 $8,123 $9,701 $6,638 $59,201

2017 $59,543 $51,002 $49,652 $9,829 $9,891 $1,781 $63,286

2016 $57,237 $53,496 $49,107 $10,793 $10,436 $2,920 $63,286

2015 $42,877 $53,309 $50,224 $13,574 $10,574 $5,462 $66,266

Balance

-$30,605 -$23,894 -$25,809 -$49,914

Farm Business Management Education Programs A Member of Minnesota State

Page 1

State Summary April 2019

Summary Farm Income Statement (Farms Sorted by Years)

Minnesota State - Farm Business Management

Average

2015

2016

Number of farms

2127

2031

2103

Farm Revenue Crop sales Crop inventory change Gross crop income

Livestock sales Livestock inventory change Gross livestock income

Government payments Other cash income Other accrual changes Gross revenue

Farm Expenses Cash operating expenses Inventory Changes Depreciation Total operating expense

Interest paid Change in accrued interest Total interest expense Total expense

Net farm income from operations Gain or loss on capital sales

360,010 14,012

374,022

264,167 -4,326

259,841

25,304 94,291 -1,653 754,177

608,388 8,355

51,875 667,692

35,132 987

36,118 703,809

50,367 1,814

330,589 36,949

367,538

290,405 -11,994 278,410

32,682 112,729 -28,822 762,537

625,111 8,772

53,309 687,192

32,394 1,027

33,422 720,613

41,924 953

369,807 16,157

385,964

267,230 -8,940

258,290

22,205 80,100

6,458 753,016

599,291 9,448

53,496 662,234

34,867 407

35,273 697,507

55,509 1,728

Net farm income 100000

52,181

42,877

Net Farm Income

57,237

2017

2164

366,823 6,096

372,919 264,814

4,280 269,094

16,361 87,142

7,877 753,393

600,637 7,543

51,002 659,181

35,269 1,140

36,409 695,590

57,803 1,740

59,543

2018

2209

372,821 -3,154

369,668 234,219

-650 233,569

29,968 97,193

7,139 747,761

608,512 3,955

49,692 662,159

37,996 1,373

39,369 701,527

46,233 2,834

49,068

Net Farm Income

50000

42,877

57,237

59,543

0 2015

1,000,000 800,000 600,000 400,000 200,000 0

116,290 259,841

374,022 Average

2016 Net farm income

2017 4 Year Average

Gross Revenue

87,767 278,410

115,221 258,290

119,257 269,094

367,538

385,964

372,919

2015

Gr Crop Inc

2016

Gr Lvsk Inc

2017

Oth Inc

Farm Business Management Education Programs

A Member of Minnesota State

Page 2

49,068

2018

142,177 233,569 369,668

2018

State Summary April 2019

Financial Summary (Farms Sorted by Years) Minnesota State - Farm Business Management

Number of farms

Average 2127

2015 2031

2016 2103

Income Statement Gross cash farm income Total cash farm expense Net cash farm income Average net farm income Median net farm income

$743,772 $643,519 $100,253

$52,181 $27,772

766,404 657,505 108,899

42,877 25,392

739,342 634,157 105,184

57,237 34,321

Profitability (cost) Rate of return on assets Rate of return on equity Operating profit margin Asset turnover rate

1.8% -0.1% 5.6% 32.2%

1.2% -1.0% 3.6% 32.3%

2.0% 0.4% 6.2% 31.9%

Liquidity & Repayment (end of year) Current ratio Working capital Working capital to gross inc Term debt coverage ratio

1.59 198237

26% 1.01

1.64 211,908

27.8% 0.83

1.63 208,056

27.6% 1.04

Solvency (end of year at market) Total assets Total liabilities Net worth Farm debt to asset ratio

2,896,294 1,242,537 1,653,758

45%

2,816,577 1,204,953 1,611,624

45%

2,915,331 1,238,075 1,677,256

45%

Nonfarm Information Net nonfarm income Farms reporting living expenses Total family living expense Total living, invest, & capital

34,472 444

59,099 86,454

33,868 470

60,798 97,314

33,082 453

58,526 80,890

2017 2164

735,140 635,906

99,234 59,543 26,556

2.2% 0.6% 6.8% 32.1%

1.57 192,178

25.5% 1.10

2,955,907 1,261,663 1,694,245

45%

33,090 442

58,933 84,694

2018 2209

734,201 646,508

87,693 49,068 24,817

1.8% -0.3% 5.7% 32.4%

1.52 180,805

24.2% 1.08

2,897,360 1,265,455 1,631,905

46%

37,849 409

58,139 82,916

Term debt coverage ratio

Financial Standards Guidelines >1.75Green

2.00

< 1.25 Red

Working Capital - A Look at Liquidity

350,000

80%

1.50

1.01

1.04

1.10

1.08

1.00

0.83

198,237 211,908 208,056

60%

192,178

175,000

40%

20%

26.3% 27.8% 27.6% 25.5%

0.50 Average 2015

2016

2017

2018

Farm Business Management Education Programs

A Member of Minnesota State

Page 3

0 Average 2015

0% 2016 2017

State Summary April 2019

Financial Standards Measures (Farms Sorted by Years)

Minnesota State - Farm Business Management

Average

2015

2016

2017

2018

Number of farms

2127

2031

2103

2164

2209

Liquidity Current ratio Working capital Working capital to gross inc

1.59 198,237

26.3%

1.64 211,908

27.8%

1.63 208,056

27.6%

1.57 192,178

25.5%

1.52 180,805

24.2%

Solvency (market) Farm debt to asset ratio Farm equity to asset ratio Farm debt to equity ratio

45.3% 54.8%

0.83

45% 55% 0.82

45% 55% 0.82

45% 55% 0.82

46% 54% 0.86

Profitability (cost) Rate of return on farm assets Rate of return on farm equity Operating profit margin Net farm income EBIDTA

1.8% -0.1% 5.6% 52,181 138,361

1.2% -1.0% 3.6% 42,877 128,655

2.0% 0.4% 6.2% 57,237 144,279

2.2% 0.6% 6.8% 59,543 145,214

1.8% -0.3% 5.7% 49,068 135,294

Repayment Capacity Capital debt repayment capacity

Capital debt repayment margin

Replacement margin

Term debt coverage ratio Replacement coverage ratio

90,509

990

-26,283 1.01 0.78

76,187

-15,363

-39,205 0.83 0.66

95,471

3,710

-23,718 1.04 0.80

97,230

8,645

-20,346 1.10 0.83

93,148

6,967

-21,863 1.08 0.81

Efficiency Asset turnover rate (cost) Operating expense ratio Depreciation expense ratio Interest expense ratio Net farm income ratio

32.2% 81.6%

6.9% 4.8% 6.9%

32.3% 83.1%

7.0% 4.4% 5.6%

31.9% 80.8%

7.1% 4.7% 7.6%

32.1% 80.7%

6.8% 4.8% 7.8%

32.4% 81.9%

6.6% 5.3% 6.6%

100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0%

80.3% 2009

65.1%

Operating Expense Ratio; >80% Red 8% Green, ................
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