Our grandparents may have been able to make a good living on a farm of 80 to 160 acres with some livestock. However, the economics of today's agriculture has changed drastically and has become more volatile. This has necessitated changes in what today's farm looks like.
As input costs increase and commodity prices farmers receive fluctuate, profit margins change over time. As these changes occur, farmers have had to change their businesses. Some farmers have gone out of business. Some are farming part-time and work off the farm to supplement their income. Others have gone to alternative farming methods in order to remain in farming. Yet others still farm full-time, and they have increased the size of their farms in order to remain profitable.
Whether we agree or disagree with these changes, the changes are a function of economics and the changing agricultural industry. The following numbers will illustrate these changes. The numbers are not to justify the changes but are one approach to explain the changes. The numbers presented are real numbers from real farm operations in southern Minnesota.
In 2008, a total of 345 of the 815 farm families from the MnSCU South Central/Minnesota West Adult Farm Business Management Program kept household and personal expense records. Their average household and personal expense for the year was $89,147 with an average family size of 3.3 persons.
This family living expense includes: food, medical care, charitable donations, supplies, furnishings, clothing, educational costs, recreation expenses, gifts, utilities, child care, house rent and upkeep of the house. Also included are expenses for the purchase of non-farm vehicles, investments, savings, life insurance premiums, income/social security taxes, and non-farm capital purchases.
The assumption is that the farm income would cover all the family living expense and that the net income from the farm crops or livestock would pay those expenses. Where applicable, the net income for any crops includes any associated government payments and is based upon a 5 year average.
Based upon net farm income numbers, if a farm family planted a 50/50 corn soybean rotation, they would need 442 acres of corn and 442 acres of soybeans – a total of 884 acres to earn the family living amount of $89,147. For other enterprises, it would take 144 dairy cows, 20,447 contract hogs or 3,191 beef steers to earn the $89,147 family living cost.
For more details, see the Ag Business Management web site at www.farmmanagement.umn.edu and click on "publications" for an article titled "What does it take to earn a living on the farm?"
By Gary Hachfeld, ag business management educator, University of Minnesota Extension