April 8, 2003
VARY CONSIDERABLY ACROSS ILLINOIS IN 2002
operator returns for labor and management on 3,165 Illinois farms
varied considerably between geographic areas and decreased slightly
in 2002 compared to returns experienced by producers in 2001. Higher
grain prices and slightly lower costs did not offset lower corn
yields and less government payments. Lower livestock returns also
contributed to lower incomes on farms producing livestock. Changes
in the government farm program and higher grain prices sharply reduced
the amount of government farm program payments producers received
Operator's Net Farm Income and Labor and Management Income, 1993
were highest in the west central and central areas of the state.
Earnings were lowest in southern and northeastern Illinois where
dry weather reduced corn and soybean yields. Producers in far southern
Illinois experienced large losses due to very low yields caused
by drought conditions during last summer.
LABOR AND MANAGEMENT EARNINGS
return to the operator's labor and management income in 2002 was
$12,976 (Figure 1). This figure can be thought of as the farmer's
"wage" or "salary". This is what remains from
the operator's net farm income after a fair return to the operator's
equity in machinery and land has been subtracted. The 2002 returns
were $3,736 below the 2001 average of $16,712 and $1,645 below the
average for the last five years.
labor and management income was $20,000 to $25,000 in central Illinois,
negative $10,000 to $15,000 in southern Illinois and negative $60,000
to $70,000 in far southeastern Illinois. Northeastern Illinois also
experienced negative earnings. Labor and management earnings averaged
$15,000 to $20,000 in northwestern Illinois.
Labor and management
incomes have varied greatly during the last five years, ranging
from a low of a negative $8,461 in 1998 to the high of $33,707 in
2000. These figures are based on results from summaries of records
kept by farmers enrolled in the Illinois Farm Business Farm Management
Association (FBFM) record keeping and business analysis program.
were 14 bushels per acre lower and soybean yields were 1 bushel
per acre lower in 2002 compared to the yields recorded in 2001.
The average corn yield on the 3,165 farms was 145 bushels per acre.
Soybean yields averaged 47 bushels per acre. Corn yields were generally
highest in the western and northwestern part of the state while
soybean yields were generally highest in the central, western and
northwestern areas of the state. Differences in average yields among
different geographic regions of the state were much greater than
in most years. Year-end inventory price for the 2002 corn crop of
$2.30 per bushel was 30 cents higher per bushel than a year earlier.
Soybeans were inventoried at $5.50 per bushel, $1.10 higher than
December 31, 2001.
prices received for the 2001 corn and soybean crop sold in 2002
were above their inventory price resulting in a positive marketing
margin. Crop returns averaged $337 per tillable acre, $10 per acre
lower than the 2001 crop returns.
NET FARM INCOME
The study indicates
that a reasonable charge for the farm operator's debt-free capital
invested in machinery, equipment, land and inventories averaged
$14,228. Added to the $12,976 average wage, the operator's share
of net farm income was $27,204. The operator's share of net farm
income in 2001 was $33,396. This amount, plus any non-farm income,
is what the operator has available for family living expenses, income
and Social Security taxes and to repay long-term debt.
studies indicate that on average it takes about $50,000 to $55,000
to meet family living expenses and to pay income and social security
taxes. The average net farm income figure for 2002 would be below
the average family living requirements, resulting in a decline in
net worth. Additional nonfarm income
could reduce the drop or even increase net worth, depending on the
level of nonfarm income.
BY FARM TYPE
by farm operators were highest on grain farms followed by dairy,
beef and hog farms.
Returns to operator's labor and management averaged $15,677 on grain
farms, $12,760 on dairy farms, negative $11,509 on beef farms and
a negative $15,839 on hog farms. Dairy farms recorded the highest
earnings in 2001. Farms classified as grain farms were 85 percent
of all farms while hog farms comprise 5 percent of the total.
FARM PROGRAM PAYMENTS
an important part of farm income, government farm program payments
declined significantly in 2002 compared to 2001. This was due to
the implementation of a new government farm program and higher grain
prices. The new farm program replaced Production Flexibility Contract
Payments with Direct Payments, the ad hoc Market Loss Assistance
Payments were discontinued and to some extent replaced by Counter
Cyclical Payments. The Loan Deficiency /Marketing Loan Gain Payment
provisions of the old farm program were included in the new farm
program. While producers earned Direct Payments in 2002, higher
commodity prices resulted in limited Loan Deficiency Payments and
no Counter Cyclical Payments. Government farm program payments in
2002 were about 7 percent of gross farm returns compared to 21 percent
size of these farms continues to grow, averaging 895 tillable acres
in 2002. This was 16 acres larger than the previous year and 90
acres larger than five years ago. Farms classified as grain farms
averaged 959 tillable acres compared to dairy farms, which averaged
339 tillable acres.
a result of lower incomes, farmers spent less for machinery and
equipment than the year before. Expenditures decreased 10 percent
in 2002 compared to 2001, averaging $31,092 per farm, or $35 per
tillable acre. Machinery purchases in 2001 averaged $39 per tillable
acre and in 2000 averaged $38. Unless farm income prospects for
2003 improve, expenditures for machinery and equipment cannot be
expected to increase much, if any.
GROW CORN AND SOYBEANS
costs per acre to produce corn and soybeans in 2002 decreased as
compared to 2001 in all areas of the state. Lower fertilizer, nonland
interest and land costs were the main factors resulting in lower
costs. Cost per bushel to produce corn and soybeans decreased slightly
in northern Illinois and increased sharply in southern Illinois.
Cost per bushel to raise corn and soybeans increased significantly
in southern Illinois due to the low yields. Cost per bushel to raise
soybeans decreased in central Illinois while cost to raise corn
was about the same or slightly higher depending on the geographic
area in central Illinois. Total economic costs per acre to raise
corn and soybeans on these farms averaged $403 and $324 respectively.
From a sample
of pure grain farms in the state, the total economic costs per bushel
of corn produced were $2.77 with an average yield of 145 bushels
per acre. The total costs per bushel of soybeans were $6.75 with
an average yield of 48 bushels per acre. This compared with costs
per bushel of $2.61 and $6.99 for corn and soybeans respectively
in 2001. This was the lowest cost per bushel to grow soybeans since
1994. The variation in yields and costs the past few years makes
it important to analyze these costs over more than one year. The
1998-02 five-year average to produce corn and soybeans on these
farms is $2.71 per bushel for corn and $7.04 per bushel for soybeans.
all livestock enterprises except feeder cattle were lower in 2002
compared to 2001. Lower
market hog prices were the main factor for the lower hog returns.
Farrow-to-finish hog producers were about $6 to $8 per hundredweight
below the breakeven level in covering total costs in 2002. Dairy
producers experienced lower returns due to lower milk prices, $1,370
returns above feed per cow in 2002 compared to $1,845 in 2001. Milk
prices were 18 percent lower compared to the year before. Feeder
cattle enterprises experienced slightly higher returns due to lower
replacement cattle prices. Slaughter cattle prices received were
9 percent lower while prices paid for replacement feeder cattle
were 8 percent lower. Returns above feed per cow decreased somewhat
for beef cow enterprises due to higher feed costs and lower prices
received for market animals. Returns were slightly below the last
last number of years livestock producers have benefited from relatively
low feed costs. Feed costs did increase in 2002 for all livestock
enterprises due to higher grain prices. With relatively low grain
stocks, weather problems that reduce grain production will result
in higher feed costs for livestock producers.
With a larger
business and smaller margins, it is critical for producers to have
complete and accurate financial records. The FBFM record-keeping
program is a service geared towards providing production and financial
business analysis for today's commercial farm operators. More information
about FBFM can be obtained from contacting the local FBFM specialist,
the local University of Illinois Extension office or calling the
Department of Agricultural and Consumer Economics at the University
of Illinois at 217/333-0754. The FBFM website address is http://www.fbfm.org.
Dale Lattz, Department
of Agricultural and Consumer Economics