Despite drought Minnesota farmers fared well in 2021

A tractor pulls equipment in a field with an irrigation system.
A farmer works the soil Monday September 13, 2021 in Pope County as a center pivot irrigation system sits idle.
Paul Middlestaedt for MPR News

Despite drought conditions that affected much of Minnesota last year, farm profitability improved for the second year in a row, after seven years of economic struggles.

“Surprisingly enough, I think for most folks this was the second highest profitability for farms on an inflation adjusted basis for Minnesota.” said Pauline Van Nurden, an Extension Economist at the University of Minnesota Center for Farm Financial Management, discussing a survey comparing farm financial data collected since 1996.

All farm types in Minnesota saw positive net farm income for the second year in a row.

Farmers participating in the survey represent about 10 percent of Minnesota farms that have gross annual income exceeding 250,000 dollers.

a man reaches into a tank of water
Rancher Cody Schmalz cleans algae growth from a livestock watering tank on August 2, 2021 near Lancaster.
Dan Gunderson | MPR News

In 2020, farm profits were largely the result of expanded government payments related to trade disputes and the coronavirus pandemic. Government payments fell by about 50 percent in 2021 according to Van Nurden, but farm income grew because of higher commodity prices.

Before you keep reading ...

MPR News is made by Members. Gifts from individuals fuel the programs that you and your neighbors rely on. Donate today to power news, analysis, and community conversations for all.

“We saw commodity prices, especially for grains, continue to increase throughout the year, but even pork and beef prices were stronger that the previous year,” she said.

Corn and soybean harvests were generally better than expected in 2021, said Van Nurden, because timely rains and improved crop genetics offset some of the anticipated drought impact.

The higher prices for grain crops meant increased feed costs for livestock farmers, but most hog and beef producers still had improved earnings over the previous year.

Dairy farms saw a slight decline in profitability in 2021 because of lower milk prices, and cattle farmers paid more for good quality hay that was in short supply because of the drought, adding to expenses.

But improved profits for most farmers led to increased working capital and lower debt, positioning farmers well for what could be a volatile 2022 because of the war in Ukraine and continuing supply chain disruptions.

Farm commodity prices are expected remain strong, but the cost of expenses like fuel, fertilizer and labor are increasing.

The U.S. Department of Agriculture predicts a decline in farm profitability in 2022.