May 5, 2017
Lincoln, Neb. — The 2016 Nebraska Farm Business, Inc. averages were recently completed. The average data shows several surprises in 2016 including an increase in net farm income from $29,432 in 2015 to $45,703 in 2016. This is the first increase in net farm income since 2011 but it is still lower than any other year, besides 2015, since 2002.
The averages are a summary of producers all across Nebraska that participate in the financial analysis program. The program allows producers to have a comprehensive analysis of the financial health of their business from accrual basis net farm income, an earned net worth change, cost of production, 21 financial ratios and more. The data collected from the farm’s records is then averaged to provide participating producers with information to benchmark their operations.
Fourty-four percent of the operations in 2015 saw negative net farm income while only 30 percent did in 2016, with a majority of those being predominately livestock operations. The income for crop operations - more than 70% of their gross income comes from crops- rebounded to the 2014 levels after a drop in 2015, but the operations with a significant beef component saw continued losses.
The level of total debt carried by each operation jumped 13 percent from 2015 to 2016. There was an increase in gross income possibly indicating that the size of operations increased. However, the continual increase in risk is something operations need to be concerned with. Average debt per acre has more than doubled since 2004.
There was a significant drop in family living costs. Costs have been dropping slightly from the peak of spending in 2012 but this was the first time the averages approached a drop of more than 10%. The average family living costs in 2016 were $83,210 compared to $91,991 in 2015. The largest drops came from personal care, recreation and miscellaneous expenses. Cash donations and household repairs were the other large drops. The only significant category to increase was food and meals.
2016 was the first time in over 10 years that more money was pulled out of savings than was put in. This is an indicator of the continued cash flow crunch. That cash flow crunch is most accurately measured by working capital which saw no significant improvement in 2016 even with a large amount of refinanced debt. Without adequate working capital, an operation will struggle to pay their bills and service the mounting debt.
According to Tina Barrett, director of Nebraska Farm Business, Inc., while the increase in net farm income is significant and a positive sign that the farm economy is trending in the right direction, it is still too low to create a return on the significant investment of a farming operation with an addition of payment for the labor and management for the operator. Farm operators will need to continue to be diligent in the management of every aspect of their operation to ensure the survival of the business.
Department of Agricultural Economics