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Farm income in Minnesota dropped sharply in 2009

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Livestock farmers in Minnesota saw the biggest drops in income in 2009, compared to 2008, according to a new report from the University of Minnesota. Pictured are cattle on Tim Henning's farm near Lismore, Minn.
MPR Photo/Mark Steil

Minnesota farmers took a financial bruising last year after posting some of the highest income levels ever in 2008.

A report released today by the University of Minnesota and the state college system found heavy losses in some parts of the state's $16 billion farm economy. Overall, farm income in Minnesota fell to an eight-year low last year, down by almost two-thirds from the previous year.

That stress is showing up in farm houses across the state.

The main problem for farmers is that on average the prices they received for their products in 2009 were lower than the year before. That's items like corn, soybeans, milk and meat. Combine that with the high cost of fuel, fertilizer and other supplies and you had a sinking economic equation.

"It was a tough year," said Dale Nordquist, associate director of the Center for Farm Financial Management at the University of Minnesota. "We were even a little bit surprised at how far down income was."

The report tracked detailed financial information on 2,400 Minnesota farms. Nordquist said the median 2009 net farm income on those farms was just over $33,000, compared to $91,000 the year before. With the decline the farm sector shed considerable wealth.

"A lot of producers lost a lot of their working capital and a lot of livestock producers in particular lost a lot of equity in the past year," Nordquist said.

The median 2009 net farm income in Minnesota was just over $33,000, compared to $91,000 the year before.

Hog farmers suffered the worst, losing, on average, $73,000. Cattle producers lost $13,000 per farm. Dairy operations in the survey made a scant profit, $2000. Crop farmers had the best results, averaging a $60,000 profit. But that was less than half of what they made in 2008, Nordquist said.

 All that bad financial news is showing up at the bank.

"It disrupts your entire life," said Mary Nell Preisler, who tracks the affect financial problems have on farmers.

As director of the farmer lender mediation program at the University of Minnesota, Preisler helps farmers drowning in debt. Her organization provides mediators who sit down with farmers and bankers to work out loan payback solutions to keep the farm in business.

So far this year, Preisler said, farmer requests for financial mediation are up 40 percent over last year. She said those financial problems are causing serious stress in farm families.

"What we find are people go into a survival mode," Preisler said. "Where they many times will cash in life insurance or borrow against it. Their medical costs may get higher because of the stress level.

"We're finding more divorces. People are getting to the point where one spouse says 'this is enough, I can't take anymore so I'm leaving'."

The farm economic downturn will be felt across rural Minnesota. If farmers are struggling, they can't spend as much money as they have in the past, and that will hurt small town economies across the state, Preisler said.

As farmers gear up for spring planting there are signs that 2010 may be turn out better than last year. Hog and cattle prices have risen to profitable levels recently. Dairy prices are also up a little. But prices for corn, soybeans and wheat remain low, Minnesota Farm Bureau President Kevin Paap said.

"Certainly we're feeling some of the crunching like everybody else is in Minnesota," Paap said. "But hopefully we'll have good weather. And we'll have things that are in our control that will go very well and things not in our control will not go against us."

There are a couple of ways for Minnesota farmers to make money on their crops this year. A large harvest could give producers substantially more grain to sell than expected. Having more to sell can offset low prices.

Another scenario is poor weather during the growing season in other parts of the U.S outside of Minnesota. If the weather is bad enough to reduce the harvest, grain prices are likely to rise substantially higher.