Net Farm Income Rebounds,
But Ag Economy Continues to Slump
Economist says it’s more important than ever for farmers to know financial position.
Kansas average net farm income somewhat rebounded last year to $43,161 from a dismal stretch the previous year when income fell to $6,744 — the lowest in 30 years. The improvement in 2016 was supported by higher crop yields and a decrease in crop production input and machinery costs, according to data from the Kansas Farm Management Association’s (KFMA) annual summary of member farms.
Not all Kansas farms are KFMA members, but the annual summary can be helpful in identifying trends in agriculture across the state, said Kevin Herbel, KFMA executive director. The 2016 summary information is based on member data from 1,024 farms, including a range of operations such as dryland crop production to irrigated crop production to various types of livestock production businesses.
Prices for most commodities continued at sub-par levels in 2016, Herbel said, but above-average crop yields per acre in many areas helped lead to greater value of farm production. That, coupled with a decrease in overall crop production and machinery expenses, contributed to the rise in net income.
The KFMA data showed that crop value per acre was up 5.4% at $330.66 in 2016, while crop production costs per acre were down 6% at $246.99, and machinery costs per acre were down 8.9% at $86.21.
“After a number of years of annual increases, the machinery investment per crop acre was down 4.2% to $255.21 as KFMA members purchased and updated less machinery and equipment during the year,” Herbel said.
Overall farm debt levels decreased slightly on KFMA farms in 2016. This occurred as current liabilities decreased while intermediate and long-term debts increased, he said, adding, “This would appear to reflect some restructuring of debt to be occurring among the KFMA farms following a period of substantial increases to current liabilities in recent years.”
As is the case every year, the average net farm income varied sharply from one region of the state to another. In 2016, southeast Kansas farms fared better than in other areas, with average net farm income of $109,344. Northeast Kansas income averaged $48,197, southwest at $39,615 and north-central at $34,205. Net income for farms in northwest Kansas averaged $389 and south-central farms averaged a loss of $5,352.
Even with outcomes in 2016 better than a year earlier overall, the agricultural economy is still in a slump, Herbel said, adding that it is important to note that 35% of the KFMA farms recorded a net loss for the year, with much variation in revenue and cost structure between farms.
“As we continue in this economic downturn in the agriculture sector, it continues to be important for every producer and farm adviser to know and understand the financial performance on each operation,” Herbel added. “Careful planning, good communication and management decisions based on a quality set of records will be essential for each operation as they chart the path for 2017 and the years ahead.”
Six KFMA economists participated in a roundtable discussion of the new report on the May 24 edition of the Agriculture Today radio program, produced by Kansas State University (K-State) Research and Extension. That discussion is available online in three parts: Part 1, part 2 and part 3.
The complete KFMA report is available online at www.agmanager.info/kfma/.
Editor’s Note: Mary Lou Peter is a communications specialist, news writer and editor with the K-State Research and Extension News Media Services Unit.