Making A Living On The Farm

The week of March 19-25, we’re celebrating National Ag Week across the U.S. Many times, non-farm citizens wonder: “Why can’t farms be the size they were in the early 1970’s, and why can’t family farms be successful at that size?” According to the 1974 USDA Census of Agriculture, the average farm size in South Central Minnesota was 261 acres of cropland, 25 dairy cows and 23 sows in a farrow-to-finish swine enterprise. According to the MnSCU Farm Business Management (FBM) Summary of actual farm records for 2000-2004 in South Central Minnesota, the average net returns were $45.75/acre for corn, $38.30/acre for soybeans, $11.63/hog marketed, and $461.81/dairy cow.

Using the 2000-2004 average net returns, the estimated net farm income at 1974 production levels would be about $23,000/year, which was probably adequate to meet the family living expenses for most farm families in 1974. However, according to the MnSCU FBM Summary, the average money spent by farm families on family living needs (all non-farm expenses) in 2004 was slightly over $56,000/year. The result would mean that the expected average net farm return today from the average farm size of 1974 would be about $33,000 short of meeting the expected family living expense needs of today’s farm family.

Another way to look at this scenario is: What size of farm or how many production units would it take to meet the 2004 estimated family living expenses of just over $56,000 per year? According to an Information Sheet developed by Gary Hachfeld with the U of M Extension Service, following are the 5-year average net returns with various crop and livestock enterprises, and the number of units needed annually in a family farming operation to reach the 2004 level of estimated family living expenses in South Central Minnesota:
Corn – Average return = $45.75/acre; 1,226 acre
Soybeans – Average return = $38.30/ acre; 1,464 acre
Corn/Soybean Rotation – Average return = $41.72/ acre; 1,344 acre
Farrow-To-Finish Hogs – Average return = $11.63/hog; 4,821 hog marketed
Finish Feeder Pigs – Average return = $8.90/ hog; 6,300 hogs marketed
Contract Finished Hogs – Average return = $4.13/ hog; 13,577 hogs
Dairy Cows – Average return = $461.81/cow; 121 cows
Beef Finishing – Average return = $85.60/head; 655 head
Beef Cow/Calf – Average return = $$61.90/cow; 121 cows

It should be noted that these averages were 5-year average FBM net returns for South Central Minnesota. According to FBM summaries for Southwest and Southeast Minnesota, the 5-year average net returns were lower in nearly every category, and the average annual production units needed to meet family living expense needs were increased.

This data points out why we continue to see farm sizes grow, why farmer operators are looking to diversify their farm business by adding livestock enterprises, why farm operators are looking to investments in ethanol, biodiesel, wind energy, etc. to supplement farm income and why many farm families need to rely on off-farm income to provide some of their family living expense needs. According to the 2004 FBM Summary for South Central Minnesota, the average crop enterprise had a total 668 acres, well short of the 1,344 acres estimated to meet average family living expense needs. Based on the 2005 FBM Summary, off-farm income averaged about $25,000/year for a farm family, meeting about 45 percent of their family living expense needs. Off-farm employment is also a valuable way to provide family health insurance, retirement plans and other benefits.

Editors note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.