Farm income decreases in 2011

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The average farm saw a 12.3 percent decrease in net farm profit from 2010 to 2011, according to financial information provided by farmers enrolled in South Dakota’s Farm/Ranch Business Management Program, said Farm Management Instructor Roger DeRouchey.

The program, which has the purpose to assist farm and ranch operators in upgrading their management skills, is offered to South Dakota farmers and ranchers through Mitchell Technical Institute.

Average net farm profit of the 100 farms enrolled in the program was $260,891 in 2010, and that profit decreased to $228,908 in 2011.

The decrease is not as bad as it might seem, since 2011 figures were up against an extraordinary 2010, which DeRouchey said was “really phenomenal — 2010 was the best year I’ve ever seen, and 2011 was probably the second best.”

Placed in perspective, the average farm’s 2011 net profit of $228,908 was still much higher than the 2009 average net profit of $120,000.

Net farm profit represents dollars earned from the farm before business expansion, loan principal payments and family living expenses are paid.

The average enrolled farm family farm spent $66,103 for living expenses but also earned $17,471 from outside income. Non-farm income helps cover family expenses for today’s farming, DeRouchey said.

A number of factors contributed to the decrease in net income.

The 2010 farming year was good in both livestock and crop enterprises, but a wet spring increased the prevented planted acres in 2011.

Conversely, a dry fall in 2011 saw reduced corn and soybean yields when compared to the remarkable 2010 crop year.

The top 20 percent of most profitable farms did considerably better, with net farm profit of $459,716, whereas the lowest 20 percent, or least profitable, farms netted $45,311.

The spread in income is often a result of differences in management practices, size of the farming operation, and climatic conditions.

Progress was made toward increasing net worth, or owner’s equity.

The average farmer in the program saw a change in equity of $234,570, or a 16 percent increase.

In 2010, the change in equity was an increase of $206,076, or 15 percent.

Those gains can occur as a result of investing farm income into capital assets or repaying debt, DeRouchey said.

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