Minnesota farmers’ bottom lines remain strong despite challenging year

Minnesota farms saw continued financial improvement in
2022, despite global uncertainty, inflationary pressures and lingering drought conditions across much of
the state. Crop yields were above trendline even with the difficult growing conditions. With strong
prices throughout the year for the state’s major commodities, Minnesota farms were able to improve
their financial position in preparation for expected economic challenges in 2023.
Median net farm income for Minnesota farms reached $179,728 in 2022. This was another year of
improved profitability after challenging financial years from 2013 to 2019. This profitability level was an
8 % increase over the previous year and when adjusted for inflation, 2022 farm profits were the second
highest among the historical records. The average Minnesota farm saw continued improvement in
working capital and retained earnings. Repayment capacity, solvency, and financial efficiency
performance remained strong.
“There was much uncertainty going into the 2022 production year for Minnesota farms. The dry
conditions, inflationary pressures, and market volatility were all top of mind for Minnesota producers,”
said Pauline Van Nurden of the University of Minnesota’s Center for Farm Financial Management.
“Many Minnesota farms used risk management techniques to lock in profits by marketing their
commodities and securing inputs before costs soared. This will be harder to do in the coming year.”
This analysis includes 2,131 participants in the Minnesota State Farm Business Management programs
and 109 members of the Southwest Farm Business Management Association. Participating farmers
represent about 12 % of Minnesota’s farms with gross incomes over $250,000 annually.
The data is collected by a database called the FINBIN. The FINBIN not only provides data for traditional
commodity agriculture but several special initiatives in recent years are helping to address big questions
in Minnesota agriculture. A beginning farmer program has aimed to help with farm transition; an organic
benchmarking program is analyzing the profitability of these farms; and decision tools are being
developed to help address the questions related to climate smart agriculture.
“We are excited to dig into the economic impact of cover crops. We hope to expand the findings of this
project over time, by tracking acres using cover crops over several years to learn more about the
economic impacts of this production system. These are big questions on the minds of farmers today.

We hope to help inform the decision making process for Minnesota farmers,” said Keith Olander of the
Minnesota State Northern Agricultural Center of Excellence.
Improved prices lead to profits; increased expenses hamper gains
The median net income for crop farms was $234,853. Cash crop sale prices during the year were again
up compared to 2021. Yields for the major crops of the state were also above the 10 year average. This
includes corn, soybeans, wheat, and sugarbeets.
Higher crop prices translated into higher feed costs for Minnesota livestock producers. Yet, earnings
improved for most dairy and beef producers, while hog farm profits were down slightly year over year.
In general, livestock operation profitability was bolstered by the cropping side of their farming
“Livestock profitability was improved in 2022. By year end, livestock prices began to erode and input
expenses remain high. Currently many livestock operations are operating at a loss. And, unfortunately, I
expect this to continue for the foreseeable future. Hopefully farmers were able to build a strong
financial position to weather this current financial storm and all the inflationary challenges facing them,”
said Nate Converse, Farm Business Management instructor at Central Lakes College.
After receiving substantial government support related to the pandemic’s impact on ag markets,
government support payments were much lower in 2022. Only 2 % of gross farm revenue came from
government payments. Government payments received by farms were down by over 50 % in 2022.
Prospects for 2023
There is much uncertainty related to 2023 farm profitability in Minnesota. Farmers and consumers alike
share many of the same concerns. This includes the impact of inflation, rising interest rates, and general
economic uncertainty. The global market situation is also worrisome for Minnesota producers.
Agriculture is a global market, therefore the continued war in Ukraine, and uncertainty related to
Mexico and China, two of our largest export markets, are areas of concern. Much of the future concern
relates to decreased commodity prices, compressed margins and interest rate increases.
The latest USDA Farm Income Forecast echoes this concern. USDA’s February 2023 forecast predicts
inflation adjusted net farm income will decrease over 18 % in 2023. This is the result of decreased
commodity prices and input costs remaining high. Given the global nature of agriculture and the current
state of world affairs, this estimate may be overly optimistic.
“Input costs are typically ‘sticky’ for farmers. Commodity prices correct quickly, while input costs tend
to stay high after they’ve increased. Over the last year, machinery costs, land rent, and fertilizer have all
increased. These expenses don’t look like they will come down as fast as commodity prices are expected
to fall this year,” said Garen Paulson, lead field staff for the University of Minnesota’s Southwest
Minnesota Farm Business Management Association. “I encourage all farms to know their cost of
production and use this in their marketing plans to try and lock in a profit for the coming year.”