MANHATTAN, Kan. – Kansas farmers took a one-two punch with drought and lower grain prices in 2013 and the result was a drop in average net income to its lowest level since 2009, according to data from the Kansas Farm Management Association’s annual PROFITLINK Analysis.
Net income across 1,194 KFMA-member farms averaged $135,429 in 2013, down from $159,352 in 2012 and $166,375 in 2011. The figure is also below the five-year average of $145,096.
The biggest drop was primarily in western Kansas, which experienced the worst of the state’s drought conditions, said Gregg Ibendahl, Kansas State University associate professor of agricultural economics. However, the major grain-producing areas of the country did not experience drought and as a result U.S. grain production was good and this pushed down prices.
Not all Kansas farmers are members of the KFMA, but the annual report provides a glimpse of financial conditions for producers across the state, especially when comparing one year to the next.
The data showed that about 23 percent of the farms had net income of $200,000 or higher, while 42 percent had income of $50,000 to $200,000. Twenty-nine percent had net farm income of $0 to $50,000 and almost 14 percent operated at a loss.
“A big chunk of our farms are making $0 to $55,000 a year. Most people are not getting rich,” Ibendahl said. “Even in the best years, the majority of farms make under $100,000.”
A tale of six regions
“Northwest Kansas fared the worst, partly because of the drought, but also because grain prices went down so much,” Ibendahl said. “All of a sudden the value of the grain inventory was down. Because the study considers net income on an accrual basis, the lower inventory was reflected in lower farm income.”
The average price of U.S. corn in 2013 was $4.50 a bushel, down from $6.89 in 2012, according to the U.S. Department of Agriculture. The average price of soybeans last year was $12.70 per bushel, down from $14.40 a bushel in 2012.
Net farm income numbers varied widely by regions across the state, with northwest Kansas averaging $35,791, southwest at $71,633 and southeast at $161,776. Income in north central Kansas averaged $136,045; south central at $151,303; and northeast at $154,867.
Dryland net farm income across 855 farms was $156,991, down from $169,061 a year earlier and about the same as $157,296 two years earlier.
Net income for the 59 farms that irrigate crops averaged $118,974, well below $347,315 in 2012 and $449,115 in 2011.
Yields on irrigated farms typically don’t vary that much, Ibendahl said, so last year’s lower grain prices and inventory values weighed them down.
“That will be a factor in this coming year,” he added. “With crops in some of the bigger producing states — Iowa, Illinois, Indiana and Ohio – we’re on track to have pretty good U.S. production next year. We were looking at pretty good grain prices for a few years but will probably be lower next year.”
Livestock a bright spot
Last year’s lower grain prices meant trouble for grain growers, but gave livestock producers a boost.
“Anything to do with livestock did pretty well, compared with the year before,” Ibendahl said, noting higher meat prices and lower grain prices. “Those in the cattle background feeding and finishing went way up. They had a really good year.”
The 2013 average net income for backgrounding-finishing operations was $162,459, well above $46,193 a year earlier, but below $397,138 two years earlier.
Net income for farms in the “Crop – Sow & Litter” category averaged $206,724, up from $166,809.
Overall, the report showed the average value of livestock produced in 2013 at $92,241, compared with $88,507 a year earlier and $106,280 two years earlier.
Family living expenses
Total family living expenses rose to an average of $71,377, up from $70,242 in 2012. Family living expenses have increased every year since the 2009 average of $54,981.
“If you look at our family living expenses and the fact that they were higher, even though net income fell, there’s a two- to three-year lag before families are able to make the adjustment after income has been up,” Ibendahl said. “When you have money, you’ll tend to spend more of it. With the potential for lower grain prices this coming year, farm families will need to monitor their family living to avoid eating into their net worth.”