Last month the USDA came out with estimated number of farms in Minnesota declining by 300 from 73,600 in 2015 to 73,300 in 2016. The total amount of land in farms was constant, but the average farm size increased by one acre per farm from 352 acres in 2015 to 353 in 2016. Looking back 20 years there were an estimated 87,000 farms in Minnesota with an average size of 343 acres in 1997. Total land in farms declined from 29,800,000 acres in 1997 to 25,900,000 acres in 2016.
What is surprising is how the numbers varied by size group. Small farms less than $10,000 in gross sales declined from 33,000 in 1997 to 26,500 in 2016. Farms from $10,000 to $99,999 gross sales declined from 31,000 in 1997 to 21,600, but farms with over $100,000 increased from 23,000 in 1997 to 25,200.
Comparing land in farms by size indicates small farms under $10,000 in sales in 1997 was 3,200,000 acres and 2,100,000 in 2016, while farms with gross income from $10,000 to $99,999 were 8,900,000 acres in 1997 and 3,600,000 acres in 2016. Land in farms with over $100,000 in sales had 17,700,000 acres in 1997 and 20,200,000 aces in 2016.
Much of these changes in numbers can be associated with the cost of living increases and the need to generate larger sales to cover increased farm expenses and living costs. In 1997 the average living cost for farm families in adult farm management was $34,284 for a farm family of 3.7 and in 2015 this had increased $67,092 for 3.1 family size, almost double. Total farm cash expenses were $303,241 per farm in 1997 and increased to $798,226 in 2015, more than double.
If you divide the average family living costs by total crop acres of 648 in 1997 and 940 in 2015. That translates into $53 per acre in 1997 and $72 in 2015 in family living costs. This can be explained by increased cost due to inflation. What did a loaf of bread, a gallon of milk or health insurance, cost in 1997 compared to 2015? Corn price was $2.30 at end of 1997 and soybean price was $6.40, while at end of 2015 corn price was $3.19 and soybean price was 8.04.
If a farmer can generate $50 of net income per acre they would need to farm 686 acres to cover living costs in 1997 and in 2015 the same farmer would need 1342 acres. This is the simple answer as to why farm size continues to increase. The smaller hobby farms by far outnumber larger farms with 48,100 farms with gross income less than $100,000. Today a farm would need to have over $500,000 in expenses to generate a majority of their income from farming. There were 10,400 farms of this size in 2016 compared with 62,900 in the other size groups which accounts for the smaller farm size and slower growth in acres.