In line with national trends, farmers’ incomes in Minnesota dropped for the fifth straight year in 2017, according to recently released data from the University of Minnesota Extension and Minnesota State.
The data shows that among all farm types, about one third of farmers lost net worth in 2017. A decrease in income has been a problem for farmers since about 2013, and because of overproduction, high cost of equipment and changes in the international agriculture market, experts say the situation will not improve anytime soon.
“Farmers came out of 2012 in strong financial shape after the Recession. Since then, farmers have had the highest costs and are feeling the pinch. … Their net worth is slowly bleeding away,” said Extension economist Dale Nordquist.
On average, crop farm profits fell nearly 50 percent in 2017, to about $23,700. Profits decreased significantly for corn and soybeans, despite higher yields than the year before.
Livestock farms also saw income decreases, especially dairy farmers who are, on average, operating at a loss and considered to be under the most financial stress. Experts do not anticipate these farmers’ finances will improve next year, either.
Plunging incomes are caused by overproduction, expensive equipment and farming methods, Nordquist said.
The prices for agriculture products are either equal to or less than production costs, so farmers can’t make an adequate profit, said Ed Usset, a professor from the University’s Department of Applied Economics.
This decrease in income is not exclusive to Minnesota, and it is a significant national issue, Usset said. Countries worldwide are producing large amounts of crops, so the U.S. is not the sole provider to other countries. Plus, worldwide supply has caught up to the demand for agricultural products, he said.
Now, experts expect farmers will encounter more financial stress because China has imposed tariffs on U.S. crops, like soybeans, Usset said.
A report from the United States Department of Agriculture predicts prices will continue to decrease nationally. Net farm income is expected to drop nearly seven percent from 2017, to about $59.5 billion, according to a February release analyzing data from earlier this year.
This would be the lowest net farm income level in dollars since 2006. Production expenses are also expected to rise in 2018 due to increases in fuel, oil, interest and hired labor, according to the USDA report.
However, some farming communities can adapt to the financial stress by expanding to industries outside agriculture, said Kent Olson, professor and associate dean for the University’s Extension Center for Community Vitality.
Some communities have invested in manufacturing and tourism in their area to rely less on agricultural products and diversify their economies, Olson said.
Still, this income decrease is affecting rural communities across the country and will continue to be a problem as trade relations intensify, Olson said.
The data collectors hope that this information will provide more awareness for farmers who are struggling nationwide.
“In the U.S., we take food for granted and don’t realize that food is produced by someone. Most people can’t imagine life without their smartphones, and it’s even harder to imagine the food shelves bare,” Usset said. ”If we can track this, we can know if our producers are profitable or not and if something can be done to help them.”