MN Crop Land Rental Rates Continue Downward Trend

Over the last five years, the average land rental rates across Minnesota have declined by twelve percent. This includes a one year decline from 2017 to 2018 of 1.6%. This information is based on weighted average data from the FINBIN farm financial database. The Cropland Rental Rates publication has recently been updated and includes detailed information for each Minnesota county over the last five years.

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The Impact of 5%

Each year as you work with customers you encourage them to set goals.  Undoubtedly, some of these goals revolve around financial management.  Within your credit analysis review, you are looking at the past financial performance of the individual farm or business operation.  In this process, you likely look at their individual trend performance and may also benchmark this against their peers.  Hopefully, the customer has also taken the time to evaluate their financial position and talks to you as their lender about the business goals they’ve set.  These may be things like, “Reduce fertilizer costs”, “Improve marketing”, “Improve yields”, “Improve profit margins”, etc. 

Have you ever considered with your customers the impact these relatively small changes actually have on the business?  I suggest challenging businesses to work to improve their margin management by 5%.  It may seem like a simple task, improving gross income and decreasing operating expenses by 5%.  But, this 5% improvement can have a significant impact on a business in any given year.  And then, think of the impact over the customer’s career!

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Dairy Revenue Protection as a strategy to stabilize dairy revenue

Dairy Margin Coverage

Dairy Revenue Protection (RP) is a new tool available to dairy producers which can be used in conjunction with the Dairy Margin Coverage (DMC) program.  RP provides protection against an unexpected decline in revenue (price and/or yield) on the milk produced from dairy cows on a quarterly basis. There are five choices a farmer must decide on when enrolling in Dairy RP: 1) method to value milk (class or component), 2) Amount of quarterly milk to cover, 3) Coverage level for revenue guarantee, 4) Protection Factor, and 5) which quarterly contracts to purchase.

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2018 FINBIN Report on MN Farm Finances

Minnesota farmers continued to struggle with low prices and low profitability. Median net income was $26,055 in 2018, down 8%. After adjusting for inflation, Minnesota farms earned the lowest median farm income of the 23 years included in FINBIN. The economic pain was widespread; median incomes were $31,000 or lower for all of Minnesota’s major commodity farms; crop, dairy, pork and beef producers. Not every operation struggled though. Across all farms, the farms earning the highest net incomes, those in the top 20%, earned an average of $184,000. Those in the lower 20% lost almost ($72,000).  View the 2018 FINBIN Report on Minnesota Farm Finances to learn more about the financial health of the state’s agriculture industry.

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Dairy Margin Coverage and how it may help your borrowers

By: Joleen Hadrich, Associate Professor, Extension Economist

Dairy Margin Coverage (DMC) is a voluntary federal program available to dairy farms across the country, which can be used to help stabilize dairy farm revenue.  DMC replaces the previous Margin Protection Program (MPP).  DMC makes payments to enrolled farms when the national average income over feed cost margin falls below the coverage level selected by the farmer. A number of coverage levels are available for dairy farmers with varying premium rates. 

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Minnesota Farm Income Hits Historic Low

After adjusting for inflation, Minnesota farms earned the lowest median farm income in the past 23 years of data tracked by University of Minnesota Extension and Agricultural Centers of Excellence within Minnesota State.  

In 2018, the reported median net income was $26,055, down 8 percent from the previous year. Farmers in the lowest 20 percent reported losing nearly $72,000. The analysis examined data from 2,209 participants in farm business management programs, as well as 101 members of the Southwest Minnesota Farm Business Management Association.  This is a collaborative project with the FINPACK Team and the Center for Farm Financial Management (CFFM).

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Does the Implementation of Technology Improve Farm Profitability?

Agriculture and Technology

By:  C. Robert Holcomb and Joleen Hadrich

In 2017, the Minnesota State Colleges and Universities Farm Business Management Program, the Southwest Minnesota Farm Business Management Association (SWMFBMA), and the University of Minnesota Extension conducted a survey to identify management skills and tendencies of highly successful producers. 

This month, we will discuss how the use of technology in the farm operation affects profitability.  (Previous articles in the Top Farmer series can be accessed here and here.) Only 6% of all farms considered themselves innovators, adopting technology at its earliest availability.  Forty-five percent of the respondents consider themselves early adopters, making investments in new technology once proven by a small number of success stories.  This group does not consider themselves innovators though. 

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Projections Training

FINPACK Online Training

We want all users to have a positive experience using the FINPACK tools.  Therefore, several training options are available to assist with learning the ropes of the new FINPACK Projection tool.

One of the training options for FINPACK is online training.  Each FINPACK tool has a learning module in FINPACK Online Training.  As you migrate to the 3-in-1 cash flow projection (FINFLO), know training is available and accessible for your use. These training modules have been updated to specifically address using the FINPACK Projections tool (FINFLO).

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Family Living Expenses Add Up

Family Living Expenses

When putting together customer cash flow projections for the coming year what amount of family living expense is appropriate?  Family living expense is unique to every household, but averages can be used as a starting point.  The FINBIN farm financial database is a great resource to assist with this question.  (The FINBIN database summarizes actual farm data from thousands of agricultural producers who use FINPACK for their farm business analysis.  The data in FINBIN is contributed by farm management education programs across the country.)

So, let’s take a look at the numbers.  Over 750 farm families keep track of detailed family living expenses in the database.  In 2017, a family of 3 spent $63,648 on cash family living expenses.  This amount includes expenses like food, health insurance, medical care, clothing, household supplies, utilities, and recreation to name a few.  Family living expenses obviously vary depending on family size, stage of life, spending habits, and benefits provided by non-farm employment.  When income taxes paid and personal capital purchases are added, an additional $21,508 was consumed in 2017, bringing total cash family living costs to $85,156 for that same family of 3. 

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Converting Legacy Projections

The Legacy Projection tools in FINPACK will be retired at the end of 2019. This includes the Annual Cash Flow Plan and the Monthly Cash Flow Plan. As you work on renewals in 2019, the FINPACK Team suggests you test out the new Cash Flow Projection tool found in Projections. Yes, there are a few changes to cash flow projections in the new tool, but by and large, we think you will appreciate many of the updates.    

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