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Showing posts from 2016

Southwestern Minnesota Farmland Values Decline 2.6 percent in 2016

By David Bau, Extension Educator

At the end of each year for the last twenty-two years, a survey has been conducted of farm land sales in fourteen southwestern Minnesota counties. Land values had been on a steadily increasing until 2014. The survey reports bare farm land sales to non-related parties for the first six months of each year. After reaching record high prices in 2013, the upward trend was broken as prices declined in 2014. The trend continued in 2015 and 2016.  Data collected in this survey is available at the county extension offices in Chippewa, Cottonwood, Jackson, Lac qui Parle, Lincoln, Lyon, Martin, Murray, Nobles, Pipestone, Redwood, Rock, Watonwan and Yellow Medicine Counties. This year the decline across the fourteen counties averaged 2.6%. Average land values had not declined since 1996 when the average SW Minnesota land prices were $1,175 per acre in 1995 to a high in 2013 to $8,466 then declined in 2014, 2015 and again to $6,751 in 2016.

Data from these countie…

What Are the Keys to Successful Farm Business Management?

By:  Pauline Van Nurden, Extension Educator
The new year is right around the corner and with that comes a blank page to create your financial plan for the coming year. As a farmer, do you ever struggle with what needs to be included in your financial management plan? Are you looking to boost your farm financial management skills? As you look to start the new year off on the right foot, make sure you have a handle on your business;s finances. 
Balance Sheet – Do you sit down at the beginning of the year to create a balance sheet? This gives a snapshot of what you own and what’s owed against it. You’ll then determine your net worth. Creating a balance sheet at least annually is important to assess your profitability and business gains. Income Statement – Do you look at the profitability of your farm over the last year by creating an income statement? The income statement measures profitability by determining the net income of your farm. This is calculated by subtracting the farm …

Look Back to Look Ahead

by Betty Berning Extension Educator
The end of the year is rapidly approaching.  It is a special time of family, friends, and reflection.  As 2016 comes to an end, look at the year past and the year ahead.  I’d like to suggest that you ask yourself four questions:
What went well?What didn’t go well?What do I want to do differently?Where do I want to go from here?Being positive is important.    Start off by identifying areas where things went as planned.  It was a tough year.  You survived.  What did you do well?  What are you grateful for?  Maybe your family worked well together.  Perhaps the cows had great production.  In spite of the slow harvest, did you have record yields?  Look at your victories.  Spend some time analyzing them and asking “why did this happen?  What was my role in it?”  This will help you understand what behaviors or actions made a difference and what to continue in the future.  It is really important to focus on the positive during challenging times.

Moving on, thin…

Ag Tax Publication Available for Farm Families

By Gary Hachfeld, Extension Educator

With farm profit margins very slim in agriculture today, financial planning is crucial to the survival of a farm operation. That planning includes tax planning for the end of the year. A tax planning publication is now available for farm families which includes many of the new ag tax rules and related information. This information will aid farm families as they prepare for the tax season.

With the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015, there were substantial changes in depreciation rules. Section 179 depreciation has been permanently established at $500,000 with a $2 million dollar overall investment limit before phase out takes place. Qualified Section 179 property includes breeding livestock, machinery, single-purpose agricultural structures and drainage tile. The qualified property can be new or used. The legislation makes permanent the rule allowing a taxpayer the ability to revoke I.R.C. Section 179 elections an…

Where Can Farmers Lower Cost?

By David Bau, Extension Educator

Average 2017 corn and soybean budgets for cash rented farmland look unprofitable at projected input costs and current market prices available.  In 2007, prices were similar to what is available in 2017 for corn and soybeans. The table below compares actual figures for 2007 and 2015 from the FINBIN database for southern Minnesota and compares them to trends for 2017.

Corn and Soybean Input Costs Comparison between 2007, 2015 and 2017


The figures for 2017 indicate losses on both corn and soybeans. Even with crop insurance and government payments and corn lost money in 2015. Examine the fourth line from the bottom: Total direct expense per bushel you will see that in 2007 Southern Minnesota farmers needed $2.37 per bushel of corn to cover the direct costs and $5.12 per bushel for soybeans. Comparing these to the trend figures for 2017 of $3.43 for corn and $8.16 for soybeans, this represent a 45% increase for corn costs and 59% increase for soybean costs w…

Women in Ag Network Announces December Event!

Women in Agriculture Network (WAGN) is excited to announce its quarterly seminar, being held in December: "Taking Charge of YOUR Finances- How to Survive and Thrive".  
The event will be December 6, 2016 at the Farmington Regional Extension office (located at the Dakota County Extension and Conservation Center, 4100 220th St. West, Farmington, MN 55024).  Registration is at 8:30 AM with the program running from 9:00 AM-3:30 PM.  The fee is $20, which covers the cost of lunch.  Payment can be made the day of event.
"Financial management is the key to a successful farming operation," Pauline Van Nurden, Extension Educator, shared.  "Having an understanding of farm finances impacts all management decisions.  Attending our 'Survive & Thrive' workshops will give producers a base understanding of the major financial statements and how to put them into action in their operation."  This program will use an interactive approach to learning about financia…

USDA Average County Rents Published in September

By David Bau, Extension Educator

The National Agricultural Statistic Service with the USDA released the county farmland rental rate estimates for 2016.  After increasing continuously since 2007, statewide average rents went down for the second year in a row. The state average cropland rental rates declined from $185 in 2014 to $180 in 2015 to $170 in 2016 as indicated in Chart 1 below. This represented a 5.5% decrease from 2015 to 2016 and 2.7% decrease from 2014 to 2015.  Previously rental rates had a 4.5% increase from 2013 to 2014, 18% from 2012 to 2013 and 11.1% from 2011 to 2012. Statewide Irrigated rental rates declined from $210 in 2015 to $185 in 2016 almost a 12% drop. Pasture rent average increased from $26 per acre in 2014 to $28 per acre in 2015 to $30 in 2016 or an increase of 7.1%.
Table 1 below lists the actual farmland rental rates by county from Adult Farm Management Records. Since farmers and landlords are starting to negotiate 2017 farmland rental rates and the last…

What is a Fair Farm Rental Agreement?

By David Bau, Extension Educator

Landlords, Farmers, Agri-Business Professionals should make plans to attend one of the informative meetings being held across Central and Southern Minnesota. These free meetings are being provided by the University of Minnesota Extension.  Farm land rental rates have never been higher and determining a fair profitable farm rental agreement is a challenge in today’s economy with recent record corn and soybean prices and record farm land values and current significantly lower price for 2014, 2015, 2016 and 2017.

Negotiating a fair rental agreement that satisfies the land owner and the farmer is a challenge.  David Bau, Extension Educator in Ag Business Management, will provide several ways; by examples, factsheets and worksheets to determine a fair farm land rental rate for both parties.

Topics covered at the meetings will include local historic and projected farmland rental rate trends, current farm land values and sales, a worksheet that will help dete…

What is a Fair Farm Rental Agreement? (SW Minnesota)

by David Bau, Extension Educator

Landlords, Farmers, Agri-Business Professionals should make plans to attend one of the informative meetings being held across Central and Southern Minnesota.  These free meetings are being provided by the University of Minnesota Extension.  Farm land rental rates have never been higher and determining a fair farm rental agreement is a challenge in today’s economy with recent record corn and soybean prices and record farm land values and significantly lower prices since 2014.

Negotiating a fair rental agreement that satisfies the land owner and the farmer is a challenge.  David Bau, Extension Educator in Agricultural Business Management, will provide several ways; by examples, factsheets and worksheets to determine a fair farm land rental rate for both parties.

Topics covered at the meetings will include local historic and projected farmland rental rate trends, current farm land values and sales, a worksheet that will help determine a fair and profitabl…

Cash Flow Statement- Watch Where the Money Goes

By Betty Berning, Extension Educator   


This is it- the last of the financial statement articles.  I promised I would write three:  one for each of the commonly used financial statements on farms.  I am sure some of you are breathing a sigh of relief! If you recall, I’ve written about balance sheets- first article- and income statements- second article.  A balance sheet tracks your assets (cash, land, machinery) and liabilities (loans, mortgages, accounts payable).  An income statement looks at your profitability over time.  For example, your Schedule F from your tax return is an informal income statement because it lists where you received and spent money.  This article will focus on cash flow statement (CFS), the third financial statement.  CFS is precisely that:  a statement that explains the flow of cash in your business.  In other words, how did money move in and out of your business?  Where did your income come from?  What kind of expenses did you have?                 Imagine tha…

MN Livestock Investment Grants Available

Funds for On-Farm Livestock Improvements 

Recently the MN Department of Agriculture (MDA) announced there are $2 million in grants available for improvement projects on MN livestock farms. These funds are available through the Agricultural Growth, Research, and Innovation (AGRI) Program.

Successful applicants are reimbursed 10 percent of the initial $500,000 of their investment. The maximum available per year for a producer is $25,000.

Applications are due by Dec. 16, 2016. Funded projects will need to be completed between Jan. 1, 2017 and June 30, 2018. Complete details of this program, including application documents, can be found on the MDA website.

Financial Help Available For Farmers Impacted By Floods

Updated Disaster Loan Program Available
The Minnesota Rural Finance Authority (RFA) has just released updated information regarding their Disaster Loan Program. Farmers who experienced losses as a result of recent flood conditions can qualify for a zero-interest loan through the RFA. This RFA loan is a participation (or essentially shared) loan with the producer's current lender. The RFA portion of the loan is limited to 45 percent of the principal balance, up to a maximum amount of $200,000. This loan can be used to "replace or repair items lost or damaged due to flooding and not covered by insurance" according to the MN Department of Agriculture News Release.

For more information, farmers should contact their local lender or the MN RFA at 651-201-6004.

Skills for Negotiating; Land Rents, Contracts, Purchases and Other Business Agreements

by Don Nitchie, Extension Educator

Over time, you can fall into a mind-set, especially with long-time landlords, lenders and other suppliers or vendors you may work with—that all they care about is the “bottom line”. This maybe true for some but, not necessarily for all. Now with the pressure caused by tight or negative profit margins, to reduce costs—good negotiating skills and practices can be a significant business advantage. This can be the case even with your long-term business relationships and certainly with new ones you are considering. As a decision-maker you have lots of good data at your disposal-from FINBIN and many other sources. While this data is very useful in business negotiations, “people skills” are required beyond just the use of or knowledge of data, to be successful in negotiating. The following are negotiation techniques highlighted in Katie Shonk’s Guidelines for “Getting to Yes” blog post, with examples that have been customized for specific farm business situ…

Skills for Negotiating; Land Rents, Contracts, Purchases and Other Business Agreements

by Don Nitchie, Extension Educator

Over time, you can fall into a mind-set, especially with long-time landlords, lenders and other suppliers or vendors you may work with—that all they care about is the “bottom line”. This maybe true for some but, not necessarily for all. Now with the pressure caused by tight or negative profit margins, to reduce costs—good negotiating skills and practices can be a significant business advantage. This can be the case even with your long-term business relationships and certainly with new ones you are considering. As a decision-maker you have lots of good data at your disposal-from FINBIN and many other sources. While this data is very useful in business negotiations, “people skills” are required beyond just the use of or knowledge of data, to be successful in negotiating. The following are negotiation techniques highlighted in Katie Shonk’s Guidelines for “Getting to Yes” blog post, with examples that have been customized for specific farm business situ…

What Direction will 2017 Farmlands Rents Go? Stay the Same? Up? or Down?

by David Bau, Extension Educator

Each year I put together tables listing actual farmland rental rates by county from Adult Farm Management Records.  Unfortunately farmers and landlords are starting to negotiate 2017 farmland rental rates and the last actual numbers available are for 2015 so I am forced to estimate figures for 2016 and 2017.  When I did this last year I used an estimate of a 5% decline and the actual figure came in at 5.3% decline statewide.  For 2016 I heard many times that rents were down $20 to $25 per acre, although some rents went up and some remained the same.  In table 1 below I estimated a 10% decline in 2016 from 2015.

But what direction should 2017 farmland rental rates go?  How do I determine an estimate for 2017 farmland rental rates?

Should they stay the same? 
Landlord property taxes continue to increase, while schools pass referendums that also increase taxes. If rents stay the same, a landlord’s income will go down if taxes increase and if taxes are not …

What Direction will 2017 Farmlands Rents Go? Stay the Same? Up? or Down?

by David Bau, Extension Educator

Each year I put together tables listing actual farmland rental rates by county from Adult Farm Management Records.  Unfortunately farmers and landlords are starting to negotiate 2017 farmland rental rates and the last actual numbers available are for 2015 so I am forced to estimate figures for 2016 and 2017.  When I did this last year I used an estimate of a 5% decline and the actual figure came in at 5.3% decline statewide.  For 2016 I heard many times that rents were down $20 to $25 per acre, although some rents went up and some remained the same.  In table 1 below I estimated a 10% decline in 2016 from 2015.

But what direction should 2017 farmland rental rates go?  How do I determine an estimate for 2017 farmland rental rates?

Should they stay the same? 
Landlord property taxes continue to increase, while schools pass referendums that also increase taxes. If rents stay the same, a landlord’s income will go down if taxes increase and if taxes are not …

Use Your Income Statement to Understand Your Farm's Finances

by Betty Berning, Extension Educator
I’ve written a couple articles this year and all have been related to farm finances.  I am passionate about finance and economics, but I understand that finance isn’t the most glamorous topic for most people.  Would you believe that I’ve tried very hard to make these articles as exciting as possible?!  I know, I know, they’re not very exciting! 
Having said that, finances are very important.They are critical to a farm’s success.Without strong finances and a solid understanding of them, one’s operation will have a difficult time surviving.Anyone can become better at understanding finances, it just takes time and practice (repetition).
I’ve written about understanding revenue and expenses and balance sheet.If you recall, the balance sheet is one of four financial statements.The other three are 1.Income statement, 2.Statement of cash flows, and 3.Statement of retained earnings.For this post, I’ll focus on what an income statement is and what it tells you…