“What does it take to earn a living on the farm?”
Good question. What’s the answer?
Actually, the question was the title of a report from a Minnesota Extension educator (we used to call them ‘agents,’ remember?). He used real farm numbers from more than 450 real farm families to try and pencil out the answer. OK, so the farm families are all in the southern third of Minnesota, but can we learn anything, too?
Changing scenery. Before he gets into the nitty-gritty, Gary Hachfeld observes, as we all have, that agriculture has changed drastically in the last 10 years.
“As input costs increase and commodity prices farmers receive remain static or decrease,” Hachfeld notes, “profit margins over the long-term have narrowed.” And as profit margins narrow, farmers have had to change their operations.
Some left farming. Some farm part-time and boost their income (and benefits) with off-farm jobs. Some switch gears and raise alternative crops or develop a niche market. Some increase the size of their farms to be able to farm full-time and remain profitable.
“Whether we agree or disagree with this size change, whether we like or dislike this size change, it is an economic fact,” Hachfeld writes.
$64,000 question. In 2005, 374 Minnesota farm families in one region had an average household and personal expense of $64,046, with an average family size of 3.4 people. The family living expense included: food, medical care, charitable donations, supplies, furnishings, clothing, educational costs, recreation expenses, gifts, utilities, child care, house rent and upkeep of the house. Oh, and a couple other fun expenses like nonfarm vehicles, investments, life insurance premiums, income/Social Security taxes, savings and nonfarm capital purchases. It doesn’t take long to add up to $64,000.
Hachfeld took the farms’ net returns (money left over after all farm expenses are paid, excluding labor and management) from 2001 to 2005 and calculated how many acres of crop or number of livestock units it would take to earn that $64,000.
By the numbers. Like any good economist, he threw in a couple assumptions: To tally that $64,000 on x acres of corn, he’s assuming only one enterprise. You raise corn and only corn and not pigs, too. Second, there is no off-farm income included and all family living income comes from the farm.
To earn the $64,046 from raising corn only (including government payments), for example, the family would have to have 2,520 acres of corn; soybeans, 1,478 acres; alfalfa hay, 334 acres.
If you raised farrow to finish hogs, you’d need to raise 4,417 head a year to get that $64,000. Or 5,925 head of hogs, if you’re just raising them from weaning to finish. If you’re just finishing out feeder pigs, you’d need to raise 6,502 head.
Interestingly, if your enterprise is contract finish hogs, you’d need to finish 16,338 head a year.
Cow-calf operations need 815 cows to earn the $64,000 living; dairy cows, 121 head.
And in two other regions of the state, farm families reported higher family living expenses, at $74,513 and $76,005, so the units required to earn that living are even higher.
Hachfeld, who’s been crunching these numbers for four or five years, said a lot of people, on the farm and off the farm, don’t think in terms of profit margin per unit, but it brings a different perspective to the ‘why do they have to get so big’ discussion.
“These are real numbers from real people.”
And there’s your real world answer.
(Farm and Dairy Editor Susan Crowell can be reached at 800-837-3419 or at email@example.com.)