Living expenses rose $5,641 on average from 2003 to 2004 for 1,225 Illinois farm families monitored in a University of Illinois (U of I) Extension study. Total living expenses averaged $58,549 in 2004 compared to $52,908 the year before.

The families studied are enrolled in the Illinois Farm Business Farm Management Association (FBFM) and are mainly grain farmers in central and northern Illinois. The figure includes both capital--automobiles, furniture and household equipment--living expenses and non-capital living expenses.

"Income and Social Security tax payments increased in 2004 compared to the year before," said Dale Lattz, U of I Extension farm management specialist who led the study. "The amount of income taxes paid in 2004 averaged $8,208, compared to $7,571 in 2003. The amount of income taxes paid was at its second lowest level since 1989.

"Medical expenses were higher in 2004 compared to 2003. In 2004, medical expenses averaged $7,320. This is the first year medical expenses averaged over $7,000."

While expenses were rising for the sample farm families, net farm income was also up.

"In this sample, 2004 net farm income was $93,704, an increase of $27,414 over 2003," said Lattz. "Record high corn and soybean yields were the main reason for the increase in net farm incomes.

"Net non-farm income averaged $27,280, $1,361 higher than in 2003 and the highest amount this figure has ever averaged. Net non-farm income was 23% of total household income."

The operators of the 1,225 farms studied averaged 51 years of age. Families averaged 3.2 members, with the age of the oldest dependent child being 17 years, Lattz noted.

Lattz said the changing agricultural economy continues to demand better record-keeping by farm operators.

"Farm operations continue to grow in size. As these operations expand, more funds are flowing in and out of the business. More lenders are requiring cash flow projections and continual monitoring of these projections," he said. "Therefore, it is important that more farmers learn how to balance and monitor their cash flow each month."

Lattz said the data produced by the study could serve as a guide for farm families budgeting allowances for family living expenses.

"For families in this sample, the family living expenses averaged $84 for each tillable operator acre farmed," he said. "Operator acres are the number of acres the operators receives revenue from. If the net non-farm income of $39 per tillable operator acre is used for living, $45 per tillable operator acre would have to be generated from the farm business to meet family living requirements. In 2003, $40 per tillable operator acre was needed from the farm business to meet family living requirements.

"Each family must determine how much each acre of crop or each litter of hogs should contribute to their family living. This amount, when added to production costs and other obligations, can help to determine breakeven prices needed for products sold."

The entire study can be read online on U of I Extension farmdoc Web site at: www.farmdoc.uiuc.edu/manage/newsletters/fefo05_10/fefo05_10.html .